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Explain the difference between financial accounting and managerial accounting.
Financial accounting serves external parties like stockholders, creditors, and regulators, while managerial accounting provides information to internal managers for planning, control, and decision-making.
What are the purposes of cost classification?
Cost classification serves purposes like assigning costs to cost objects, accounting for costs in manufacturing, predicting cost behavior, and making decisions.
Describe the characteristics of direct costs.
Direct costs are easily traced to a unit of product or cost object, such as direct material and direct labor.
What are common costs and how are they related to cost objects?
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What is the difference between product costs and non-manufacturing costs?
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When are direct materials costs transferred from raw materials to work in process?
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Explain the difference between product costs and period costs in managerial accounting.
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Define variable costs and fixed costs in managerial accounting.
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Distinguish between committed fixed costs and discretionary fixed costs.
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Explain the concept of opportunity cost in decision-making.
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What are sunk costs, and how should they be treated in decision-making?
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Differentiate between the traditional format and contribution format for income statements.
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Explain the difference between managerial accounting and financial accounting.
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Explain the formula for determining break-even quantity and its significance in business operations.
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Define the audience of managerial accounting and explain their information needs.
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How does the scope of managerial accounting differ from financial accounting?
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What is the degree of operating leverage (DOL) and how is it calculated?
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What assumptions do managers typically make in cost-volume-profit (CVP) calculations?
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Discuss the types of information that managerial accounting provides to the management.
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Explain the key characteristics of managerial accounting in contrast to financial accounting.
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Define contribution margin and explain its significance in analyzing profits.
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What are the main differences in the information needs of managerial accounting and financial accounting?
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How can the contribution format income statement be expressed in an equation?
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What is the significance of the margin of safety in cost-volume-profit analysis?
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Explain the primary focus of financial accounting and managerial accounting, and how they differ.
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Discuss the differences in reporting requirements for financial accounting and managerial accounting.
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What are the professional opportunities available for accountants in non-public accounting environments according to the Institute of Management Accountants (IMA)?
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What are the requirements to become a Certified Management Accountant (CMA)?
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What are the content specifications covered in the CMA exam?
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What skills do managerial accounting courses aim to teach?
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Study Notes
Financial and Managerial Accounting: Key Differences and Professional Opportunities
- Financial accounting is focused on external persons making financial decisions, with a historical perspective and emphasis on objectivity and verifiability.
- Managerial accounting is concerned with managers planning for and controlling an organization, with a future emphasis and focus on relevance, precision, and timeliness.
- Financial accounting has a primary focus on companywide reports, must follow GAAP/IFRS and prescribed formats, and is mandatory for external reports.
- Managerial accounting focuses on segment reports, is not bound by GAAP/IFRS or any prescribed format, and is not mandatory.
- Managerial accounting involves planning, controlling, and decision-making activities, such as establishing goals, developing budgets, and making selections among competing alternatives.
- Different majors, such as marketing, supply chain management, and human resource management, have specific planning, controlling, and decision-making considerations within managerial accounting.
- The Institute of Management Accountants (IMA) estimates that over 80% of professional accountants in the U.S. work in non-public accounting environments.
- Employers expect accounting majors to have strong financial accounting skills, as well as the planning, controlling, and decision-making skills foundational to managerial accounting.
- To become a Certified Management Accountant (CMA), membership in the Institute of Management Accountants, a bachelor's degree, two years of relevant professional experience, and passage of the CMA exam are required.
- The CMA exam content specifications cover topics such as financial reporting, planning, performance, and control, as well as financial decision-making, risk management, and professional ethics.
- The Chartered Global Management Accountant (CGMA) designation, co-sponsored by the AICPA and CIMA, requires a bachelor's degree in accounting, passage of the CPA exam, membership in the AICPA, three years of relevant management accounting work experience, and passage of the CGMA exam.
- Managerial accounting courses aim to teach measurement skills that managers use to support planning, controlling, and decision-making activities, and focus on cost concepts.
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Description
Test your knowledge of financial and managerial accounting with this quiz. Explore the key differences between the two disciplines and discover professional opportunities in the field of management accounting, including certifications and career paths.