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Questions and Answers
What is management accounting?
What is management accounting?
The use of accounting information by company management to make rational economic decisions in performing its function of planning, organizing, and controlling business operations.
Who are the primary users of financial accounting information?
Who are the primary users of financial accounting information?
What is the primary purpose of management accounting?
What is the primary purpose of management accounting?
What is the primary purpose of financial accounting?
What is the primary purpose of financial accounting?
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Which of the following is NOT a key difference between financial and management accounting?
Which of the following is NOT a key difference between financial and management accounting?
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Which of the following is NOT a management function?
Which of the following is NOT a management function?
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Which of the following is a key difference in the type of information used in financial and management accounting?
Which of the following is a key difference in the type of information used in financial and management accounting?
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Which of the following statements accurately describes the role of a controller in a company?
Which of the following statements accurately describes the role of a controller in a company?
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Which of the following statements accurately describes the role of a treasurer in a company?
Which of the following statements accurately describes the role of a treasurer in a company?
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Which of the following is most likely a line function?
Which of the following is most likely a line function?
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Which of the following is a false statement about line and staff functions?
Which of the following is a false statement about line and staff functions?
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Study Notes
Management Accounting
- Management accounting is the use of accounting information by company management to make rational economic decisions in performing its function of planning, organizing, and controlling business operations.
Management Accounting vs. Financial Accounting
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User of Information:
- Financial Accounting: Primarily for external users.
- Management Accounting: Exclusively for internal users.
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Purpose/End Result:
- Financial Accounting: Financial reporting and compliance.
- Management Accounting: Management decision-making.
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Guiding Principles:
- Financial Accounting: Accounting standards (PFRS).
- Management Accounting: Management wants and needs.
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Type of Information:
- Financial Accounting: Primarily monetary in nature.
- Management Accounting: Monetary and nonmonetary.
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Time Orientation:
- Financial Accounting: Historical.
- Management Accounting: Future-oriented using past data.
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Emphasis of Reports:
- Financial Accounting: Reliability (precision, verifiability).
- Management Accounting: Relevance (timeliness).
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Amount of Details:
- Financial Accounting: Aggregated and simplified.
- Management Accounting: Detailed and extensive.
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Focus of Information:
- Financial Accounting: Business as a whole.
- Management Accounting: Various business segments.
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Frequency of Reports:
- Financial Accounting: Periodic (annually, quarterly).
- Management Accounting: Whenever needed.
Management Functions
- Planning: Deciding on company goals and objectives, and figuring out how to achieve them.
- Organizing: Deciding on how to use company resources to put plans into action.
- Controlling: Deciding on what corrective actions to take if there are any differences between actual results and planned results.
Line vs. Staff Functions
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Line Function:
- Authority to give orders.
- Exercises direct downward authority over line departments.
- Example: VP for operations over operations manager.
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Staff Function:
- Authority to advise but not to command others.
- Commonly exercised laterally or upward in an organization.
- Example: Staff managers provide support via advice and assistance to other managers.
Controller vs. Treasurer
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Controller:
- Planning and control.
- Financial Reporting.
- Evaluating and consulting.
- Tax administration.
- Government reporting.
- Protection of assets.
- Economic appraisal.
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Treasurer:
- Provision of capital.
- Investor relations.
- Short-term financing.
- Banking and custody.
- Credit and collections.
- Investments Insurance.
Management Accounting Purpose
- Help managers make decisions.
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