The Introduction To Management Accounting Chap 1

Question 1

Accounting

Answer 1

The process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of the information.
It provides both financial and non-financial information.

Question 2

The users of accounting information (stakeholders)

Answer 2

1. Managers: Require information that will assist them in their decision-making and control activities
2. Shareholders : Require information on the value of their investment, and the income that is derived from their shareholding
3. Employees: Require information on the ability of the firm to meet wage demands and avoid redundancies, their potential for continued employment
4. Creditors and the providers loan of capital: Require information on the firms ability to meet its financial obligations
5. Gouvernement: Requires information on the amount of profits that are subject to taxation and other information to the determine policies to manage the economy

Question 3

The users of accounting are divided in two categories

Answer 3

1. Internal users. Within the organisation, such as managers and other employees, who need this information to operate their part of the business to best effect
2. External users Such as shareholders, creditors and regulatory agencies outside the organisation

Question 4

Internal users accounting

Answer 4

Management accounting

Question 5

External users accounting

Answer 5

Financial accounting

Question 6

Differences between management accounting and financial accounting

Answer 6

1. Legal requirements
2. Focus on individual parts or segments of the business
3. Generally accepted accounting principles
4. Time dimension
5. Report frequency and less emphasis on precision

Question 7

The decision-making, planning and control process

Answer 7

1. Identifying objectives
2. Search for alternative courses of action
3. Select appropriate courses of action
4. Implement the decision
5. Compare actual and planned outcomes
6. Respond to divergences from plan

Question 8

Impact of the changing business environment on management accounting

Answer 8

1. Global competition
2. Changing product life cycles
3. Advances in manufacturing technologies
4. Impact of information technology and digitalisation
5. Environmental and sustainability issues
6. Pressures to adopt higher standards of ethical behaviour
7. Deregulation and privatisation
8. Ficus on value creation
9. Customer orientation

Question 9

The requirements for a cost and management accounting system

Answer 9

1. Allocate costs between cost of goods sold and inventories for internal and external profit reporting
2. Provide relevant information to help managers make better decisions
3. Provide information for planning, control, performance measurement and continuous improvement

Question 10

Cost accounting

Answer 10

Cost accounting is concerned with cost accumulation for inventory valuation to meet the requirements of external reporting and internal profit measurements

Question 11

Management accounting

Answer 11

Relates to the provision of appropriate information for decision-making, planning, control and performance evaluation (to internal users)