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CHAPTER 1: THE ACCOUNTANT’S ROLE IN THE ORGANIZATION TRUE/FALSE 1.Management accounting information focuses on external reporting. Answer:FalseDifficulty:1Objective:1 Management accounting information focuses on internal reporting. 2. A good cost accounting system is narrowly focused on a continuous reduction of costs. Answer:FalseDifficulty:2Objective:1 A good cost accounting system is broadly focused to provide information that helps managers at all levels implement, monitor, and evaluate company strategies. 3.Modern cost accounting plays a significant role in management decision making. Answer:TrueDifficulty:1Objective:1 4.The balance sheet, income statement, and statement of cash flows are used for financial accounting, but not for management accounting. Answer:False Difficulty:1Objective:1 The balance sheet, income statement, and statement of cash flows are used for financial accounting and also for management accounting. 5.Financial accounting is broader in scope than management accounting. Answer:FalseDifficulty:2Objective:1 Management accounting is broader in scope than financial accounting. 6.Cost accounting measures and reports short-term, long-term, financial, and nonfinancial information. Answer:TrueDifficulty:2Objective:1 7.Cost management provides information that helps increase value for customers. Answer:TrueDifficulty:1Objective:1 8.Just-in-time production and purchasing is a strategy used to reduce inventories. Answer:TrueDifficulty:1Objective: 2 9.All strategies should be evaluated regarding the resources and capabilities of the company. Answer:TrueDifficulty:1Objective:2 Chapter 1 Page 1 IntroductionManagerial accounting and financial accounting are two of the most prominent branches of accounting. They both deal with processing information which is useful in decision-making; however, they have notable differences that distinguish them from each other. Managerial accounting processes economic information to be used by management in making decisions. Financial accounting involves the preparation of general-purpose financial statements used by various users in making informed decisions. The differences between managerial accounting and financial accounting can be summarized according to the following bases of comparison: Differences between Managerial and Financial Accounting1. As to UsersFinancial Accounting: Internal and external. General purpose financial statements can be used by external and internal users. However, they are prepared primarily for external users, such as the investors, lenders and creditors, and the government. Managerial Accounting: Internal. The reports prepared in managerial accounting are strictly for use by internal users, i.e. the management. 2. As to Compliance with Accounting StandardsFinancial Accounting: Required. Financial accounting requires strict compliance with established accounting standards. Managerial Accounting: Not required. Management accounting is not required to follow accounting standards since the only users are the members of the management. 3. As to Time OrientationFinancial Accounting: Historical. Financial accounting processes historical information and summarizes them in the preparation of financial statements. Managerial Accounting: Current and future. Management accounting deals with current problems of the company. Also, management accounting involves the preparation of budgets and forecasts. 4. As to EmphasisFinancial Accounting: Reliability, verifiability, and objectivity of financial information Managerial Accounting: Relevance and timeliness, to be useful in helping management make business decisions 5. As to NecessityFinancial Accounting: Mandatory. Financial accounting is required by law. Companies are mandated to furnish financial statements periodically. Managerial Accounting: Optional. Management accounting is not mandatory. However, a company that does not use it will suffer great consequences. 6. As to EmphasisFinancial Accounting: General-purpose. Financial statements provide general information, addressing the common needs of its users. Managerial Accounting: Special-purpose. The financial reports in managerial accounting address a specific issue or concern. 7. As to Level of DetailFinancial Accounting: Concise. Financial statements present data in a standard summarized way. Managerial Accounting: More detailed. Financial reports carefully detail all information that the management should consider in making specific decisions. 8. As to Source of DataFinancial Accounting: Sources within the company, i.e. the accounting records of the company Managerial Accounting: Any source, both internal and external such as interest rates, political environment, economic and industry concerns, etc. 9. As to Frequency of ReportsFinancial Accounting: Financial statements are furnished periodically, usually monthly, quarterly, and/or annually. Managerial Accounting: Financial reports in management accounting are prepared as the need arises. In Summary
There have been arguments as to which between financial accounting and managerial accounting is more important, but is somewhat pointless. Each has its own purpose and use in the business environment. Key takeaways In this article, we differentiated managerial and financial accounting. While financial accounting provides information to internal and external users following accepted accounting standards, management accounting focuses on providing information to internal users (the management) using different analytical decision-making approaches. Web link APA format Managerial vs. financial accounting (2022). Accountingverse. Next Lesson → Previous Lesson ← Chapter Outline ≡ Does managerial accounting emphasize relevance?The managerial accounting is future emphasis and relevance for planning and control and the subject faced is detailed segment reports of an organization. And managerial accounting is relatively flexible compared to financial accounting.
What does managerial accounting emphasize?Managerial accounting information is aimed at helping managers within the organization make well-informed business decisions, while financial accounting is aimed at providing financial information to parties outside the organization.
Which branch of accounting emphasizes relevance over objectivity?Managerial accounting emphasizes relevance even if the data is not completely objective or verifiable. Differences between financial and managerial accounting: Precision and timeliness.
Is managerial accounting objective or subjective?Managerial accounting is subjective, future-oriented, and aims at providing management with information needed to make decisions.
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