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Chapter M1: Management Accounting: Its Environment and Future
Multiple Choice
1.
Three statements are true regarding management accounting and the
fourth statement is true regarding financial accounting. Financial
accounting -focuses on the future and includes activities such as preparing next
year's operating budget.
reports include detailed information on the various operating
segments of the business such as product lines or departments.
does not have to follow GAAP (generally accepted accounting
principles).
*
is used primarily by investors and creditors.
Hint for question 1
Management accounting provides information for internal decision makers of the
business such as top executives. Financial accounting provides information to
external decision makers such as investors and creditors.
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2.
Three statements are true regarding financial accounting and the fourth
statement is true regarding management accounting. Management
accounting -provides information about the company as a whole.
reports information that has occurred in the past that is verifiable and
reliable.
information is generally available only on a quarterly or annual basis.
*
focuses on estimating future revenues, costs, and other measures to
forecast activities and their results.
Hint for question 2
Management accounting provides information for internal decision makers of the
business such as top executives. Financial accounting provides information to
external decision makers such as investors and creditors.
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3.
Three of the persons listed below use management accounting
information while the fourth person listed uses financial accounting
information. The user of financial accounting information is the -factory shift supervisor.
vice president of operations.
*
current shareholder.
store manager.
Hint for question 3
Management accounting provides information for internal decision makers of the
business such as top executives. Financial accounting provides information to
external decision makers such as investors and creditors.
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4.
*
The treasurer of a corporation is the officer responsible for
cash and credit management and investment planning.
handling the daily cash receipts.
carrying out the duties assigned by the controller.
reporting to the SEC and IRS.
Hint for question 4
In a typical business, the treasurer is responsible for managing cash and credit
and planning for investments in property, plant, and equipment.
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5.
All of the following are true regarding time before the early 1800s except -
there was no need for corporate management.
*
management accounting was extensively used.
it was common for a business to have no employees.
most businesses were sole proprietorships or partnerships.
Hint for question 5
Before the early 1800s most businesses were family businesses run by
immediate family members. There was no need for management and, therefore,
no need for management accounting information.
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6.
*
From 1825 to 1925 significant developments included all except:
piece rate contractors replaced permanent employees.
the Industrial Revolution.
the rise of scientific management.
diversification.
Hint for question 6
From 1825 to 1925 four significant changes took place including the emergence
of permanent employees, the Industrial Revolution, the rise of scientific
management, and diversification.
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7.
During the Industrial Revolution --
business began relying more on human labor rather than machines.
*
managers needed information to control costs and production
processes.
the norm was one strong manager with no assisting foremen or
supervisors.
focus changed to overall profitability from effectiveness and efficiency.
Hint for question 7
During the Industrial Revolution the United States changed from an agriculturalbased economy to a manufacturing-based economy.
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8.
During the time scientific management was popular --
top management determined the amount of material, labor, and other
resources to manufacture a product.
employees rights were important.
*
standards of performance were developed.
efficiency was poor and warranted more attention.
Hint for question 8
Scientific management is a management philosophy based on the notion that
factories were run by machines.
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9.
All of the following statements are true regarding diversification except:
*
In 1625 companies began to diversify and engage in more than one
activity.
Owners could no longer directly manage all business activities and
had to rely on others to manage operations.
Company accountants tailored reports to meet the needs of
management at each level of the organization.
Owners needed a way to plan, control, and evaluate performance.
Hint for question 9
Diversification meant owners could no longer manage all of the business activities
and needed reports to plan, control, and evaluate the performance of operations.
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10.
*
The IMA --
is a professional organization of management accountants.
is a professional organization of financial accountants.
issues standards for management accounting.
issues standards for financial accounting.
Hint for question 10
IMA stands for Institute of Management Accountants.
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11.
All of the following are newer management accounting techniques
designed to fit leaner management practices except --
activity-based costing.
just-in-time inventory systems.
the balanced scorecard.
*
value-added tax systems.
Hint for question 11
Newer management accounting techniques include ABC, JIT, DFM, PVA, and the
balanced scorecard.
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12.
Trends in management accounting over the past 15 years include --
continuation of historical accounting techniques to control traditional
management practices.
*
a need for better management accounting information due to
increased global competition.
no threat to U.S. business dominance.
no significant changes in the business environment.
Hint for question 12
Management accounting techniques need to respond to greater global
competition and the belief that the world is moving from a manufacturingbased economy toward a service-based economy.
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Submit for Grade
Chapter M1: Management Accounting: Its Environment and Future
True or False
1.
*
Financial accounting and management accounting both use the same
data.
TRUE
FALSE
Hint for question 1
The primary users of financial accounting information are investors and creditors.
The primary users of management accounting information are the managers of
the business. Both are provided information by the accounting department.
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2.
A good management accounting system strives for perfect information.
TRUE
*
FALSE
Hint for question 2
The focus of management accounting is the future. Even good decisions can lead
to bad outcomes.
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3.
*
Before 1825 there was no need for management accounting.
TRUE
FALSE
Hint for question 3
From 1825 to 1925 four significant changes took place including the emergence
of permanent employees, the Industrial Revolution, the rise of scientific
management, and diversification.
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4.
Between 1925 and 1980 there were very few new developments within
management accounting.
*
TRUE
FALSE
Hint for question 4
The creation of the SEC and required compliance with the newly developed
financial accounting standards led to a focus on financial accounting and a lack of
development in new management accounting techniques.
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5.
*
Management accounting can play a significant role in helping companies
maintain a competitive advantage in a global economy.
TRUE
FALSE
Hint for question 5
Management accounting provides information to internal decision
makers.
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Chapter M1: Management Accounting: Its Environment and Future
Essay Questions
1.
Describe management accounting and financial accounting.
2.
Briefly describe how managers make use of management accounting
information.
3.
Explain why there was a lack of development in management accounting
during most of this century.
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