CHAPTER LEARNING OBJECTIVES

Test Bank for Managerial Accounting, 4e Charles Davis, Elizabeth Davis (All Chapters) 1 / 4

1-1 Test Bank for Davis & Davis, Managerial Accounting, 4/e

Chapter 1 Accounting as a Tool for Management

CHAPTER LEARNING OBJECTIVES

• Define managerial accounting (Unit 1.1)

There are several formal definitions of managerial accounting. A simple one is “the generation of relevant information to support management’s decision-making activities.”

• Describe the differences between managerial and financial accounting

(Unit 1.1) Managerial accounting’s primary users are managers and decision makers within an organization, whereas financial accounting is aimed primarily at external users. Unlike GAAP that guides financial accounting, there are no mandated rules in managerial accounting. Managerial accounting reports focus on operating segments, while financial accounting statements report results for the organization as a whole. Managerial accounting is concerned more with projecting future results than reporting past results.Managerial information is prepared to take advantage of a window of opportunity, even if some accuracy must be sacrificed. Financial accounting information is balanced to the penny and is delivered after the end of the accounting period.

• List and describe the four functions of managers (Unit 1.1)

Planning means setting a direction for the organization. Long-term, or strategic planning provides direction for a five- to ten-year period. Short-term or operational planning provides more detailed guidance for the coming year; it translates the company’s strategy into action steps. Controlling is the monitoring of day-to-day operations to identify any problems that require corrective action. Evaluating is the process of comparing a particular period’s actual results to planned results, for the purpose of assessing managerial performance. Decision making means choosing between alternative courses of action.

• Explain how the selection of a particular business strategy determines the

information that managers need to run an organization effectively (Unit 1.2) To run a business effectively, managers need information that shows how well operations are meeting the organization’s strategic goals. For instance, if the organization’s strategy is to be a low-cost producer, information about product costs and cost variances will be more useful to managers than information about research and development.

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1-2 Test Bank for Davis & Davis, Managerial Accounting, 4/e

• Discuss the importance of ethical behavior in managerial accounting (Unit

1.3) Ethical behavior means knowing right from wrong and then doing the right thing. Many companies and most professional organizations have codes of conduct to guide employees’ actions. Acting unethically can lead to illegal activity and ultimately to the destruction of the firm. Furthermore, research has shown that a public commitment to ethical behavior can lead to superior financial performance.

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1-3 Test Bank for Davis & Davis, Managerial Accounting, 4/e

TRUE-FALSE STATEMENTS

• Management accounting is the generation of relevant information and analysis provided to external

users.Ans: False – Management accounting is the generation of relevant information and analysis to support managers’ decision- making activities, LO: 1, Bloom: K, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None,

IMA: Reporting

• The American Institute of Certified Public Accountants is the leading organization for management

accountants in the United States.Ans: False – The Institute of Management Accountants (IMA) is the leading organization for management accountants in the United States, LO: 1, Bloom: K, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Business Operations

• The primary users of managerial accounting information are managers and other internal decision-

makers.Ans: True, LO: 2, Bloom: K, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

• Managerial accounting provides reports and information for a range of decision makers outside an

organization.Ans: False – Managerial accounting provides reports and information for a range of decision makers within an organization, LO: 2, Bloom: C, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

• Managerial accounting differs from financial accounting in that managerial accounting has no

comparable set of rules governing what information must be provided to decision-makers or how that information is presented.Ans: True, LO: 2, Bloom: C, Unit: 1-1, Difficulty: Easy Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

• Managerial accounting uses historical information, often with the purpose of comparing actual

results to budgeted results.Ans: True, LO: 2, Bloom: K, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

• Decision makers might have a long list of information they would find helpful, and they are generally

not willing to sacrifice accuracy for having the information quickly.Ans: False – Decision makers might have a long list of information they would find helpful. But sometimes they might need to sacrifice precision for timeliness, LO: 2, Bloom: C, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Business Operations

• Managerial accounting is designed to assist managers with four general activities: planning,

controlling, evaluating, and decision making.Ans: True, LO: 3, Bloom: K, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Business Operations

• Long-term planning is often referred to as reporting.

Ans: True, LO: 3, Bloom: K, Unit: 1-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: None, IMA: Business Operations

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