MAS_1.

1 UL CPA REVIEW CENTER

R.D.BALOCATING
UNIVERSITY OF LUZON
COLLEGE OF ACCOUNTANCY
CPA REVIEW CENTER

MANAGEMENT ADVISORY SERVICES

OBJECTIVES, ROLE & SCOPE OF MANAGEMENT ACCOUNTING

Management Accounting and Financial Accounting Differences

The accounting information system within an organization has two major subsystems:
1. a management accounting system
2. a financial accounting system
Accounting Information System

Management Accounting Financial Accounting

Information System Information System

Targeted user: internal users external users

managers stockholders and creditors
Restrictions: no mandatory rules for preparing must follow GAAP when
reports preparing financial statements
Types of financial and nonfinancial financial information
information: information
Time orientation: emphasizes the future (planning historical orientation (reports
and decision making) what has already occurred)
Aggregation: detailed information about information about overall firm
product line, departments, and so performance
on
 The accounting system should be flexible enough to supply different information for different users and
different purposes. Frequently the reports of both management accounting and financial accounting are
derived from the same database, which was originally established to support the reporting requirements of
financial accounting. Many organizations need to redesign this database in order to satisfy more fully the
needs of internal users.

Cost Accounting in Relation to Managerial Accounting and Financial Accounting

FINANCIAL COST MANAGERIAL
ACCOUNTING ACCOUNTING ACCOUNTING
INFORMATION DATA INFORMATION

 Cost accounting acts as a bridge between financial accounting and management accounting. It addresses
both financial and management accounting by providing product cost information to both internal and
external parties responsible for planning, controlling, decision making, and evaluating performance.

Management Accounting Information System

Why do managers need accounting information?
Information needs of managers include using accounting information to:
1. identify problems
2. identify solutions to problems
3. evaluate the effectiveness of decisions, such as continuous improvement efforts
The objectives of a management accounting information system are:

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1. To provide information for costing services, products, and other objects of interest to management.
2. To provide information for planning, controlling, evaluation, and continuous improvement.
3. To provide information for decision making.

The management process is summarized below:

Management Process

Planning Controlling Decision Making

Setting objectives Monitoring a plan’s Choosing among
implementation competing alternatives
Identifying ways to achieve Feedback is information Example:deciding the
the objectives used to evaluate or correct selling price of products
implementation of a plan.
Example:budgets Based on feedback, a
manager might:
– continue the
implementation as
originally planned
– take corrective action
if needed, or
– modify the plan.
Example:performance
reports, which are
accounting reports that
provide feedback by
comparing actual results
with plans

Functions of Controller and Treasurer

Controllership is the function of business management which combines the responsibility for accounting, reporting,
measurement, operating controls, auditing, taxes and related areas.

Functions of the Controller: Function of the Treasurer

a. Planning for Control a. Provisions of Capital

b. Reporting and Interpreting b. Investor relations
c. Evaluating and Consulting c. Short-term financing
d. Tax administration d. Banking and Custody
e. Government Accounting e. Credit and Collections
f. Protection of Assets f. Investments
g. Economic appraisal g. Insurance

Line Function

Is one that relates directly to the carrying out of the basic objectives of an organization. Line function has the
authority to command, act or decide in matters affecting others

Staff Function

Is supportive in nature, providing services and assistance to other parts of the organization
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The controller has line authority in his own department and performs staff function in the entire organization

Certifications for Management Accountants

1. CPA
2. CMA
3. CIA

Current Focus of Management Accounting

1. Activity-based management
2. Customer orientation
3. Cross-functional perspective
4. Total quality management
5. Time as a competitive element
6. Efficiency

MULTIPLE CHOICE
1. Which of the following is true of Managerial Accounting?
a. Complies with Securities and Exchange Commission rules and regulations.
b. Uses cost-benefit analysis to determine the amount of detail presented.
c. Prepares general-purpose reports for people outside an organization.
d. Presents summary historical data in compliance with generally accepted accounting principles.

2. Considering the time dimension, how does managerial decision making compare with external performance
evaluation?
Managerial Decision Making External Performance
a. Past Past
b. Past Future
c. Future Past
d. Future Future

3. Which of the following does not describe a feature of managerial accounting?

a. It focuses on providing information for internal uses by managers.
b. It draws heavily from disciplines other than accounting.
c. It emphasizes the organization as a whole.
d. It places much emphasis on the future

4. Which of the following does not describe a feature of managerial accounting?

a. It focuses on providing information for external users.
b. It places more emphasis on the future.
c. It emphasizes the segments of an organization.
d. It is not mandatory, as is financial accounting

5. In order to be useful to managers, management accounting reports should possess all of the following
characteristics except:
a. provide objective measures of past operations and subjective estimates about future decisions
b. be prepared in accordance with generally accepted accounting principles
c. be provided at any time management needs information
d. be prepared to report information for any unit of the business to support decision making

6. Which of the following is most associated with managerial accounting?

a. Must follow GAAP
b. Is prepared for users outside the organization.
c. May rely on estimates and forecasts
d. Always reports on the entire entity
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7. Which of the following is most associated with financial accounting?

a. Can have both objective and subjective information.
b. Prepared in accordance with GAAP
c. Can be prepared periodically, or as needed.
d. Can be prepared for the entity or segment.

8. Which of the following is a false statement?

a. Financial accounting is governed by generally accepted accounting principles whereas managerial
accounting is not.
b. Managerial accounting places more emphasis on the past than does financial accounting.
c. Financial accounting tends to emphasize precision while managerial accounting emphasizes relevance
and flexibility.
d. Managerial accounting draws heavily form other disciplines.

9. Financial accounting statements must be prepared in accordance with generally accepted accounting
principles. Managers of the company
a. Are required to follow GAAP as they utilize accounting information in their decisions.
b. Can disregard GAAP only for non-financial accounting data.
c. Can set their own ground rules on the form and content of information which is to be used internally.
d. Can set their own ground rules on the form and content of information which is to be used internally and
externally to the firm.

10. Managerial accounting differs from financial accounting in that managerial accounting:
a. Is internal and future oriented and governed by generally accepted accounting principles, whereas financial
accounting is not.
b. Is future oriented and focuses on the organization as a whole, whereas financial accounting is not.
c. Emphasizes relevant and flexible information whereas financial accounting does not.
d. Emphasizes relevant historical information about the whole firm, whereas financial accounting does not.

11. A management tool whose purpose is to show the relationship of one manager’s responsibilities to another’s is
a. An outline of the planning and control cycle.
b. The organization chart.
c. The budget.
d. The performance report
e. An evaluation of the difference between plans and actual performance.

12. Which of the following is false?

a. A line position is one that relates indirectly to the carrying out of the basic objectives of an organization.
b. An organization chart shows how responsibility has been divided among managers, and shows formal
lines of reporting and communication
c. Decentralization refers to the delegation of decision-making authority by moving the decision-making point
to the lowest managerial level possible.
d. A staff position is supportive in nature, providing services and assistance to other parts of the organization

13. An organization chart is an arrangement of boxes, which depicts the structure of an organization. This chart
does all of the following except:
a. depict the informal structure that may exist in an organization
b. show how responsibility has been divided between managers
c. show the formal lines of reporting and communication
d. depict line and staff authority in an organization

14. Essentially, the manager carries out five broad functions in the organization. Which of the following is not one
of those functions?
a. Accounting b. Planning c. Decision-making
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d. Controlling e. Motivating

15. Obtaining feedback on how well an organization is moving toward its objectives essential to the function of:
a. staffing c. controlling
b. organizing d. decision making

16. Which function is most directly related to management by objective?

a. Planning c. Decision-making
b. Controlling d. Reporting

17. Which of the following positions would least likely be a staff position?
a. controller for a manufacturer
b. lawyer for a manufacturer
c. accountant in the accounting department of a public utility
d. vice president in charge of sales for a computer manufacturer

18. Ensuring that the organization operates in the intended manner and achieves its goals is known as:
a. decision making c. directing operations
b. planning d. controlling

19. Which of the following is the development of a detailed financial and operational description of anticipated
operations?
a. decision making c. directing operations
b. planning d. controlling

20. Which of the following refers to running the organization on a day-to-day basis?
a. decision making c. directing operations
b. planning d. controlling

21. Strategic planning, as practiced by most modern organizations, includes all of the following except:
a. top-level management participation.
b. a long-term focus.
c. strategies that will help in achieving long-range goals.
d. analysis of the current month’s actual variances from budget.
e. identification of long-term key variables including external influences

22. The chief management accountant called “controller” traditionally performs these functions except:
a. The establishment and implementation of the financial planning process
b. Financial and management reporting and interpretation
c. Protection of company resources and economic evaluation
d. Preparation of proposals for product promotion

23. It attempts to satisfy costing objectives for both financial and management accounting.
a. internal auditing c. accounting system
b. cost accounting d. responsibility accounting

24. Cost accounting can best be described as?

a. Internal reporting for use in planning and controlling routine operations.
b. Internal reporting for use in management planning and control, and external reporting to the extent the
product costing function satisfies external reporting requirements.
c. External reporting to the government, various outside parties, and shareholders.
d. Internal and external reporting that may be used in making nonroutine decisions and in developing plans
and policies.

25. An example of the control process includes:

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a. setting the price of a company’s product
b. developing a strategy expanding into other product lines
c. evaluating the performance of a segment of the company
d. determining the price for a special job

26. One of the current themes of management accounting is to produce more accurate product costs. Which of
the following improves the accuracy of assigning costs by first tracing costs to activities and then to products
or customers that consume these activities?
a. process value analysis c. activity-based costing
b. strategic cost management d. activity-based management

27. Global competition has had an effect on cost management because:

a. foreign firms compete in separate markets.
b. cost information plays a vital role in reducing costs, improving productivity, and assessing product-line
profitability.
c. increased competition has decreased demand for more and better cost information.
d. smaller firms cannot compete globally reducing the need for more cost information in small firms.

28. The linked set of activities that increases the usefulness (or value) of the products or services of an
organization is the
a. direct chain. c. value chain.
b. indirect chain. d. variable chain.

29. ________ is the generation of, and experimentation with, ideas related to new products, services, or processes.
a. Research and development c. Production
b. Design of products, services, or processes d. Marketing

30. ________ is the detailed planning and engineering of products, services, or processes.
a. Distribution
b. Design of products, services, or processes
c. Production
d. Marketing

31. ________ is the acquisition, coordination, and assembly of resources to produce a product or deliver a service.
a. Research and development c. Production
b. Customer service d. Marketing

32. ________ is the manner by which companies promote and sell their products or services to customers or
perspective customers.
a. Distribution c. Research and development
b. Customer service d. Marketing

33. ________ is the delivery of products or services to customers.

a. Distribution
b. Customer service
c. Production
d. Design of products, services, or processes

34. ________ is the after-sale support provided to customers.

a. Distribution c. Production
b. Customer service d. Marketing

35. ________ describes the flow of goods, services, and information from the initial sources of materials and
services to the delivery of products to consumers, regardless of whether those activities occur in the same
organization or in other organizations.
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a. The value chain
b. The supply chain
c. Product differentiation
d. Distribution

36. Processing orders and shipping products or services to customers (also called outbound logistics) is also known
as
a. customer focus
b. distribution
c. Marketing
d. supply chain

37. What is the study of the need for activities and whether they are operating efficiently called?
a. direct and indirect cost management. c. activity-based management.
b. variable and fixed cost management. d. total quality management.

38. Which of the following describes an activity that increases the product’s service to the customer?
a. direct activity. c. value-added activity.
b. variable activity. d. non-value-added activity.

39. Which of the following is an activity that when eliminated reduces cost without reducing the product’s service
to the customer?
a. direct activity. c. value-added activity.
b. indirect activity. d. non-value-added activity.

40. According to the theory of constraints, improvement efforts should usually be focused on:
a. work centers that are not constraints.
b. the work center with the highest total cost.
c. the work center that is the constraint.
d. d. the work center with the most obsolete equipment.

41. JIT manufacturing:

a. is a product supply driven system that pushes products through the system in economic production
batches.
b. changes the way production is organized and carried out by emphasizing quality control.
c. is a product demand system that pulls products into inventory to assure customer availability.
d. has the advantage of increasing finished good inventory levels while decreasing work-in-process
inventories.

42. Total quality management focuses on:

a. an acceptable quality level.
b. increasing non-value added activities to enhance production.
c. eliminating waste and continuous improvement.
d. making one-time state-of-the-art changes.

43. Which of the following is not true about total quality management (TQM)?
a. The focus is on serving customers
b. Benchmarking is a tool used in TQM
c. Plan-Do-Check-Act-Cycle (PDCA) is a problem solving tool used in TQM
d. TQM is narrowly used because of its vulnerability to change
e. TQM avoids counterproductive organizational infighting

44. What management technique focuses on increasing quality as perceived and defined by the customer?
a. Theory of constraints. c. Total quality management.
b. Benchmarking. d. Web hosting.
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45. What does the term “just-in-time” refer to?

a. factories built just in time to meet production needs.
b. machinery placed in service just in time to begin production.
c. materials received from suppliers just in time for production needs.
d. All of the answers are correct.

46. The benefits of a just-in-time system usually include which of the following?
a. elimination of non-value-added activities.
b. increase in inventory levels, thus guarding against stock-outs.
c. increased time spent valuating inventories.
d. decrease in the number of deliveries required to maintain production.

47. What production methodology strives to eliminate inventory and increase efficiency and quality?
a. Total quality management. c. Benchmarking.
b. Theory of constraints. d. Just-in-time.

48. Which of the following best describes the term “benchmarking?”

a. producing a particular product at the lowest possible cost.
b. designing the highest quality product in a given market.
c. developing the best selling product
d. improvement gained through measuring one’s products against the best products.

49. A firm that is using a _____________________ strategy is attempting to create a perception of uniqueness that
will permit a higher selling price.
a. Value chain c. Lead time
b. Lowest cost d. Differentiation

50. The need for the cost accountant to understand the many functions of the business's value chain from marketing,
to manufacture, to customer service, has created the need for:
a. accountants to adopt a global perspective.
b. accountants to adopt a cross-functional perspective.
c. accountants to adopt a customer perspective.
d. accountants to adopt a technological perspective.