Managerial Ch.16 exam (discussion questions)

(2a) Differentiate between a department with line responsibility and a department with staff responsibility?

(1) department with line responsibility: is directly involved in providing goods or services to the customers of the company.

(2b) In an organization that has a Sales Department and a Personnel Department, among others, which of the two departments has (1) line responsibility and (2) staff responsibility

(1) line responsibility-----------?

(6) Name the three inventory accounts for a manufacturing business, and describe what each balance represents at the end of an accounting period

(1) materials inventory: these are raw materials which have not yet entered the processing phase;

(4) Distinguish between prime costs and conversion costs.

(1) prime cost: which consist of direct materials and direct labor costs

(5) What is the difference between a product cost and a period cost?

(1) product cost: consist of manufacturing costs: direct materials, direct labor, and factory overhead

(3) What manufacturing cost term is used to describe the cost of materials that are an integral part of the manufactured end product?

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As needed - daily, weekly, monthly.

Defined - annually, semi-annually, quarterly, yearly.

Managerial accounting

Financial accounting

Managerial accounting focuses on the present and forecasts for the future.

Financial accounting focuses on history; reports on the prior quarter or year.

Managerial accounting produces information that is used within an organization, by managers and employees.

Financial accounting produces information that is used by external parties, such as shareholders and lenders.

Format is informal and is on a per department/company basis as needed.

Financial accounts are reported in a specific format, so that different organizations can be easily compared.

(6) In what order should the three inventories of a manufacturing business be presented on the balance sheet?

Material inventory Work in process Finish goods

Monetary and company goal driven information.

Monetary, verifiable information.

Optional? Managerial accounting reports are not legally required.

Optional? It is legally required to prepare financial accounting reports and share them with investors.

Pertains to individual departments in addition to the entire organization.

Pertains to the entire organization. Certain figures may be broken out for materially significant business units.

Managerial accounting reports are only used internally within the organization; so they are not subject to the legal requirements that financial accounts are.

Rules in financial accounting are prescribed by standards such as GAAP or IFRS. There are legal requirements for companies to follow financial accounting standards.

The main objective of managerial accounting is to help management by providing information that is used to plan, set goals and evaluate these goals.

The main objectives of financial accounting are to disclose the end results of the business, and the financial condition of the business on a particular date.