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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. Close window 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. Close window 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. Close window 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. Close window 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. Close window 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. Close window 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. Close window 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. Close window 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. Close window 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. Close window 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. Close window 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. Close window 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. Close window 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. Close window 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. Close window 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. Close window 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. Close window Submit for Grade 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. Submit for Grade