Chapter 1 Managerial Accounting: An
Overview
Financial Accounting - correct answer-The phase of accounting that is concerned with
reporting historical financial information to external parties, such as stockholders, creditors,
and regulators.
Managerial Accounting - correct answer-The phase of accounting that is concerned with
providing information to managers for use within the organization.
7 key differences b/w financial and managerial accounting - correct answer-
1. Difference between reporting between financial and managerial accounting. - correct
answer-Financial accounting reports to those outside the organization (owners, creditors, tax
authorities, and regulators). Managerial accounting reports to managers inside the
organization for: planning, controlling, and decision making.
2. Emphases differences between financial and managerial accounting - correct
answer-Financial accounting emphasizes financial consequences of past activities.
Managerial accounting emphasizes decisions affecting the future.
3. Emphases differences between financial and managerial accounting - correct
answer-Financial accounting emphasizes objectivity and verifiability. Managerial accounting
emphasizes relevance.
4. Emphases differences between financial and managerial accounting - correct
answer-Financial accounting emphasizes precision. Managerial accounting emphasizes
timeliness.
5. Emphases differences between financial and managerial accounting - correct
answer-Financial accounting emphasizes companywide reports. Managerial accounting
emphasizes segment reports.
6. Following GAAP/IFRS - correct answer-Financial accounting must follow GAAP/IFRS.
Managerial accounting need not follow GAAP/IFRS.
7. External reports - correct answer-Financial accounting: mandatory for external reports.
Managerial accounting: not mandatory.
Segment - correct answer-A part or activity of an organization about which managers would
like cost, revenue, or profit data.
Examples of business segments - correct answer-Product lines, customer groups,
geographic territories, divisions, plants, and departments.
, Managerial accounting helps managers perform 3 vital activities - correct answer-1. Planning
2. Controlling
3. Decision making
Planning - correct answer-The process of establishing goals and specifying how to achieve
them.
Controlling - correct answer-The process of gathering feedback to ensure that a plan is being
properly executed or modified as circumstances change.
Decision making - correct answer-Selecting a course of action from competing alternatives.
Budget - correct answer-A detailed plan for the future that is usually expressed in formal
quantitative terms.
Steps in the Planning process - correct answer-1. Establish goals
2. Specify how to achieve goals by formulating questions
Control Process - correct answer-Involves gathering, evaluating, and responding to feedback
to ensure that expectations are met.
Prepare performance reports.
Performance Report - correct answer-A report that compares budgeted data to actual data to
highlight instances of excellent and unsatisfactory performance.
3 questions decision making revolves around - correct answer-1. What should we be selling?
2. Who should we be serving?
3. How should we execute?
What should we be selling? - correct answer-What products and services should be the
focus of our marketing efforts?
What should we be selling? - correct answer-What new products and services should we
offer?
What should we be selling? - correct answer-What prices should we charge for our products
and services?
What should we be selling? - correct answer-What products and services should we
discontinue?
Who should we be serving? - correct answer-Who should be the focus of our marketing
efforts?
Who should we be serving? - correct answer-Who should we start serving?
Overview
Financial Accounting - correct answer-The phase of accounting that is concerned with
reporting historical financial information to external parties, such as stockholders, creditors,
and regulators.
Managerial Accounting - correct answer-The phase of accounting that is concerned with
providing information to managers for use within the organization.
7 key differences b/w financial and managerial accounting - correct answer-
1. Difference between reporting between financial and managerial accounting. - correct
answer-Financial accounting reports to those outside the organization (owners, creditors, tax
authorities, and regulators). Managerial accounting reports to managers inside the
organization for: planning, controlling, and decision making.
2. Emphases differences between financial and managerial accounting - correct
answer-Financial accounting emphasizes financial consequences of past activities.
Managerial accounting emphasizes decisions affecting the future.
3. Emphases differences between financial and managerial accounting - correct
answer-Financial accounting emphasizes objectivity and verifiability. Managerial accounting
emphasizes relevance.
4. Emphases differences between financial and managerial accounting - correct
answer-Financial accounting emphasizes precision. Managerial accounting emphasizes
timeliness.
5. Emphases differences between financial and managerial accounting - correct
answer-Financial accounting emphasizes companywide reports. Managerial accounting
emphasizes segment reports.
6. Following GAAP/IFRS - correct answer-Financial accounting must follow GAAP/IFRS.
Managerial accounting need not follow GAAP/IFRS.
7. External reports - correct answer-Financial accounting: mandatory for external reports.
Managerial accounting: not mandatory.
Segment - correct answer-A part or activity of an organization about which managers would
like cost, revenue, or profit data.
Examples of business segments - correct answer-Product lines, customer groups,
geographic territories, divisions, plants, and departments.
, Managerial accounting helps managers perform 3 vital activities - correct answer-1. Planning
2. Controlling
3. Decision making
Planning - correct answer-The process of establishing goals and specifying how to achieve
them.
Controlling - correct answer-The process of gathering feedback to ensure that a plan is being
properly executed or modified as circumstances change.
Decision making - correct answer-Selecting a course of action from competing alternatives.
Budget - correct answer-A detailed plan for the future that is usually expressed in formal
quantitative terms.
Steps in the Planning process - correct answer-1. Establish goals
2. Specify how to achieve goals by formulating questions
Control Process - correct answer-Involves gathering, evaluating, and responding to feedback
to ensure that expectations are met.
Prepare performance reports.
Performance Report - correct answer-A report that compares budgeted data to actual data to
highlight instances of excellent and unsatisfactory performance.
3 questions decision making revolves around - correct answer-1. What should we be selling?
2. Who should we be serving?
3. How should we execute?
What should we be selling? - correct answer-What products and services should be the
focus of our marketing efforts?
What should we be selling? - correct answer-What new products and services should we
offer?
What should we be selling? - correct answer-What prices should we charge for our products
and services?
What should we be selling? - correct answer-What products and services should we
discontinue?
Who should we be serving? - correct answer-Who should be the focus of our marketing
efforts?
Who should we be serving? - correct answer-Who should we start serving?
