Chapter 1
1. Confirmatory value 2. Completeness 3. Neutrality 4. Predictive value In order for a piece of management accounting information to possess the quality of relevance, which TWO of the above should it contain?
1 and 4
Accounting is usually divided between the major strands of financial accounting and management accounting. Match the function shown in the left column to the corresponding strand of accounting shown in the drop-down list in the right column. 1. Complying with regulatory requirements A. Financial accounting B. Management accounting 2. Forecasting future information A. Financial accounting B. Management accounting 3.Budgeting and business planning A. Financial accounting B. Management accounting 4. Reporting to lenders A. Financial accounting B. Management accounting 5. Reporting to shareholders A. Financial accounting B. Management accounting 6. Producing monthly reports for senior management A. Management accounting B. Financial accounting 7. Controlling costs A. Management accounting B. Financial accounting
1. FA 2. MA 3. MA 4. FA 5. FA 6. MA 7. MA
The management accounting information system has four sequential stages. Look at the alternatives in the drop down menus and decide their correct order. First stage Information A. identification B. analysis C. reporting D. recording Second stage Information A. identification B. analysis C. reporting D. recording Third stage Information A. reporting B. recording C. analysis D. identification Fourth stage Information A. identification B. reporting C. analysis D. recording
1. Identification 2. Recording 3. Analysis 4. Reporting
Forecast financial information is rarely provided in the accounting reports produced for external users. Reasons for doing so may include: 1. fears that the business will lose competitive advantage 2. the cost of providing forecast information 3. concern over user ignorance concerning the accuracy of forecast information 4. lack of interest among users for forecast information Which TWO of the above were stated in Chapter 1 as being the key reasons? A. 1 and 3 B. 1 and 2 C. 2 and 4 D. 3 and 4
A. 1 and 3
The text states that all forms of accounting are concerned with collecting, __________ and _________ financial information. A. analyzing, communicating B. evaluating, recording C. recording, preparing D. analyzing, evaluating
A. Analyzing, communicating
Deciding whether to produce an item of management accounting information is a question of balancing the __________ against the ______. A. benefits, costs B. risks, returns C. revenue, expenses D. time, effort
A. Benefits, costs
Management accounting is concerned with four broad areas of decision making. Which of the following is NOT one of these four areas? A. Evaluating financing options B. Allocating resources C. Developing objectives and plans D. Determining costs and benefits
A. Evaluating financing options
What is the third stage of a management accounting information system? A. Information analysis B. Information reporting C. Information recording D. Information identification
A. Information analysis
The development of management accounting can be seen as going through four distinct phases. During which phase was management accounting mainly concerned with determining the cost of goods and services produced? A. Information correcting B. Information recording C. Information identification D. Information analysis
A. Information correcting
Which one of the following is the second stage of a management accounting information system? A. Information recording B. Information identification C. Information communication D. Information reporting
A. Information recording
Which one of the following is an internal user of financial statements? A. Management B. Government C. Customers D. Lenders
A. Management
The development of management accounting can be seen as going through four distinct phases. During which phase did management accounting display a shift of emphasis towards producing information for short-term planning and control? A. Phase 2 B. Phase 4 C. Phase 3 D. Phase 1
A. Phase 2
To be ________, management accounting information must cross a threshold of materiality. A. relevant B. reliable C. verifiable D. comparable
A. Relevant
Generally speaking, the higher the level of risk, the higher the expected return from an investment. A. True B. False
A. True
Where management accounting information is both relevant and faithfully represented, which ONE of the following is regarded as a quality that, if present, will further enhance its usefulness? A. Freedom from error B. Comparability C. Consistency D. Prudence
B. Comparability
Within a market economy there are strong competitive forces that ensure a failure to enhance the wealth of business owners will not be tolerated for long. The most important competitive forces are: A. Competition for owners' funds and for supplies of goods B. Competition for owners' funds and for managers' jobs C. Competition for customers and for supplies of goods D. Competition for managers' jobs and for customers
B. Competition for owners' funds and for managers' jobs
What are the fundamental qualities required of management accounting information? A. Verifiability and reliability B. Faithful representation and relevance C. Relevance and verifiability D. Reliability and faithful representation
B. Faithful representation and relevance
Is the following statement true or false?'Management accounting is applicable to profit-seeking rather than not-for-profit organisations.' A. True B. False
B. False
'For a business it tends to be easier to assess the benefits from producing management accounting information and compare it to the costs incurred.' Is the above statement true or false? A. True B. False
B. False
Which of the following changes have occurred to management accounting as a result of changes in the competitive environment? (i) More outward-looking (ii) More concerned with finding new ways of managing costs (iii) More subject to external regulation Is it: A. (i) and (iii) B. (ii) and (iii) C. (i) and (ii) D. All three?
C. (i) and (ii)
How should managers deal with risk when setting objectives? A. Accept it as inevitable B. Avoid it C. Balance it against likely returns D. Minimize it
C. Balance it against likely returns
Management accounting is intended to have an effect on the ______ of those working in the business. A. understanding B. opinions C. behavior D. attitudes
C. Behavior
Management accounting primarily exists to help user __________. A. analysis B. evaluation C. decision making D. understanding
C. Decision making
Where management accounting information is both relevant and faithfully represented, which ONE of the following is regarded as a quality that, if present, will further enhance its usefulness? A. Neutrality B. Confirmatory value C. Verifiability D. Predictive value
C. Verifiability
A piece of management accounting information is considered to be ________ when different independent experts are able to reach a consensus that it represents a faithful portrayal of reality. A. comparable B. reliable C. verifiable D. relevant
C. Verifiable
A(n) ____________analysis seeks to reveal how, given its attributes, a business is placed in relation to its environment A. strategic B. resource C. position D. environmental
C. position
________ is enhanced by treating items that are basically the same in the same manner for management accounting purposes. A. Faithful representation B. Verifiability C. Reliability D. Comparability
D. Comparability
In order for a piece of management accounting information to have the quality of faithful representation, it should possess various characteristics. Which of the following is ONE of these characteristics? A. Timeliness B. Verifiability C. Confirmatory value D. Completeness
D. Completeness
1. Management accounting tends to place more emphasis on providing objective, verifiable information than financial accounting. 2. Management accounting tends to place less emphasis on providing reports of a non-financial nature than financial accounting. Which ONE of the following combinations concerning the above statements (true/false) is correct? A. True True B. True False C. False True D. False False
D. False False
Which ONE of the following indicates an outward focus of management accounting? A. It directs attention to the costs of installing new equipment B. It deals with controlling costs of a business department C. It focuses on the control of materials usage D. It directs attention to the strengths and weaknesses of competitors
D. It directs attention to the strengths and weaknesses of competitors
Adopting a more strategic approach has led businesses to recognise that not all critical success factors can be measured in purely financial terms. This has led them to develop __________________ which may include traditional financial measures and non-financial measures. A. strategic budgets B. new financial reports C. short-term performance targets D. key performance indicators
D. key performance indicators
The development of _______ is in response to changes in the competitive environment and to the increase in size of many businesses. A. resource planning B. enterprise management C. budgetary control D. strategic management
D. strategic management
The second step in the strategic management process is to ______. A. establish mission and objectives B. identify strategic options C. select strategic options D. undertake a position analysis
D. undertake a position analysis
To be A. reliable B. relevant C. verifiable , accounting information should make a difference. It should be capable of influencing user A. decisions B. attitudes C. outlooks . To do this, it must be capable of helping to A. predict future events B. interpret past events C. explain current events , or helping to A. compare different events B. confirm past events C. verify current events , or do both.
relevant, decisions, predict future events, confirm past events
A key difference between management accounting and financial accounting reports is that management accounting reports tend to: A. be forward looking B. be more general purpose C. have longer reporting intervals D. rely more on objective, verifiable evidence
A. be forward looking
1. The threshold of materiality will vary from one business to the next. 2. The qualities that make management accounting information useful will vary from one business to the next. Are the above statements true or false? A. True False B. True True C. False True D. False False
A. True False
Consider the following statements concerning the mission and objectives of a business.1. Businesses often publish their mission statement.2. Businesses often publish their strategic objectives. Are the above statements true or false? A. False False B. False True C. True True D. True False
D. True False
As a management accountant you would be primarily concerned with: A. preparing plans and forecasts for the future activities of the business B. providing information to shareholders on how the management personnel are doing C. the reporting of past data D. the annual reporting of financial performance
A. preparing plans and forecasts for the future activities of the business
As a company's management accountant you would be primarily concerned with: A. The reporting of past data B. Preparing plans and forecasts for the future activities of the business C. The annual reporting of financial performance D. Providing information to shareholders on how the management are doing
B. Preparing plans and forecasts for the future activities of the business
________ management aims to provide a business with a clear sense of purpose and to ensure that appropriate action is taken to achieve that purpose. A. Financial B. Strategic C. Business D. Economic
B. Strategic
In strategic management, an analysis of the current position can be carried out using SWOT analysis.What does the letter 'S' stand for in this context? A. Strategies B. Strengths C. Structures D. Systems
B. Strengths
According to Peter Drucker, what is the purpose of a business? A. To enhance shareholder wealth B. To create and keep a customer C. To maximise profits D. To satisfy the needs of all those with a stake in the business
B. To create and keep a customer
1. To be considered useful, management accounting information should possess two fundamental qualities. 2. Where these fundamental qualities are present, there are a further five qualities that, if present, can enhance its usefulness. Are the above statements true or false? Statement 1 Statement 2 A. False False B. True False C. True True D. False True
B. True False
1. Managers have much more control over the range of information they receive than external users.2. Accounting systems have, in the past, been biased in favour of providing information for external users.Are the above statements true or false? A. False False B. True True C. False True D. True False
B. True True
A problem with management accounting information, and the importance placed on it, can be summarised in the often-quoted phrase 'The things that count are the things that ______'. A. can't be measured B. get counted C. affect profits D. get noticed
B. get counted
1. To be considered useful, management accounting information must have the potential to improve managers' decisions. 2. To be considered useful, management accounting information must be capable of being understood by managers who have not studied accounting. Are the above statements true or false? A. True True B. False True C. False False D. True False
D. True False
The two broad classes of accounting are management accounting and __________ accounting. A. commercial B. business C. company D. financial
D. financial
Management accounting can be seen as part of the total __________ system of the business. A. costing B. financial C. commercial D. information
D. information
Is the following statement true or false?'Strategic management is concerned with setting the long-term direction of the business.' A. True B. False
A. True
1. Financial accounting reports are more general purpose in nature than management accounting reports. 2. Financial accounting reports tend to be more backward looking than management accounting reports. Which ONE of the following combinations concerning the above statements (true/false) is correct? A. True True B. True False C. False True D. False False
A. True True
Where management accounting information is both relevant and faithfully represented, which ONE of the following is regarded as a quality that, if present, will further enhance its usefulness? A. Understandability B. Completeness C. Reliability D. Materiality
A. Understandability
Consider the following statements concerning the management of a business.1. The chief executive officer is responsible for running the board of directors in an efficient manner.2. The chairman is responsible for managing the business on a day-to-day basis.Are the above statements true or false? A. True False B. False False C. False True D. True True
B. False False
In recent decades, which one of the following has not resulted in the business environment becoming more turbulent and competitive? A. Increasing sophistication of customers B. Increasing regulation of domestic markets C. Rapid changes in technology D. Increasing pressure from owners for economic returns
B. Increasing regulation of domestic markets
Which user group usually has most control over the range and content of information it receives? A. Investment analysts B. Managers C. Suppliers D. Lenders
B. Managers
The development of management accounting can be seen as going through four distinct phases. During which phase was management accounting mainly concerned with determining the cost of goods and services produced? A. Phase 3 B. Phase 1 C. Phase 4 D. Phase 2
B. Phase 1
In recent years, ________systems have been developed. These provide an integrated suite of applications, or modules, to track resources across the whole of the business. They operate in real time and offer modules covering a range of business functions including accounting, manufacturing, marketing and sales, human resources and project management. A. Management Planning and Control B. Organisational Planning and Control C. Entreprise Resource Planning D. Business Resource Planing
C. Entreprise Resource Planning
Which one of the following is not one of the four areas of decision making where management accounting information is required? A. Determining costs and benefits B. Developing objectives and plans C. Evaluating share price performance D. Allocating resources
C. Evaluating share price performance
Consider the following statements:1.A mission statement addresses the question 'What do we want to achieve?'2.A vision statement addresses the question 'What business are we in?'Are the above statements true or false? A. True True B. False True C. False False D. True False
C. False False
1. Management accounting reports tend to have longer reporting intervals than financial accounting reports 2. Management accounting reports tend to be more detailed than financial accounting reports. Which ONE of the following combinations concerning the above statements (true/false) is correct? A. True True B. True False C. False True D. False False
C. False True
In order for a piece of management accounting information to have the quality of faithful representation, it should possess various characteristics. Which of the following is ONE of these characteristics? A. Reliability B. Consistency C. Freedom from error D. Comparability
C. Freedom from error
What is the third step in the strategic planning process? A. Undertake a position analysis B. Select strategic options and formulate plans C. Identify and assess the strategic options D. Perform, review and control
C. Identify and assess the strategic options
Which one of the following is not the task of the board of directors?A. Communicating with shareholders B. Setting business objectives and strategy C. Managing the business on a day-to-day basis D. Monitoring and controlling business activities
C. Managing the business on a day-to-day basis
A concise statement of the overall aims, or intentions, of a business is referred to as a: A. Position analysis B. Strategic plan C. Mission statement D. Statement of objectives
C. Mission statement
The key financial objective of a business is normally assumed to be the enhancement/maximisation of: A. Profit B. Return on investment C. Owners' wealth D. Sales revenue
C. Owners' wealth
In which phase of the development of management accounting was there a particular concern for controlling costs - particularly through waste reduction? A. Phase 1 B. Phase 2 C. Phase 3 D. Phase 4
C. Phase 3
In order for a piece of management accounting information to have the quality of relevance, it should possess at least one of two possible characteristics. Which of the following is ONE of these characteristics? A. Completeness B. Comparability C. Predictive value D. Reliability
C. Predictive value
In theory, the optimal amount of accounting information to be provided to a manager is the point at which: A. The cost of providing the information to the manager is minimised B. The value to the manager of each additional piece of information provided starts to decline C. The difference between the value of information to the manager and the cost of providing it is at its greatest D. The difference between the value of information to the manager and the cost of providing it is at its smallest
C. The difference between the value of information to the manager and the cost of providing it is at its greatest
Management accounting can be seen as: 1.a form of service. 2.part of a business's total information system. Are the above statements true or false? A. False False B. True False C. True True D. False True
C. True True
During which ONE of the following steps in the strategic management process would SWOT analysis be carried out? A. Identify and assess strategic options B. Select strategic options and formulate plans C. Undertake position analysis D. Perform, review and control
C. Undertake position analysis
The various groups seeking access to the financial reports of a business are normally referred to as ________ groups. A. financial B. accounting C. user D. stakeholder
C. User
Which ONE of the following has had the greatest influence in releasing management accountants from their traditional role thereby allowing them to become more pro-active within a business? A. The increasing focus on customer needs B. The development of the internet C. The increasing concern for creating shareholder value D. The development of information technology
D. The development of information technology
In order for a piece of management accounting information to have the quality of faithful representation, it should possess various characteristics. Which of the following is ONE of these characteristics? A. Understandability B. Materiality C. Prudence D. Neutrality
D. Neutrality
In which phase of the development of management accounting was there a particular concern for creating value for shareholders through an understanding of customers' needs? A. Phase 1 B. Phase 2 C. Phase 3 D. Phase 4
D. Phase 4
The development of management accounting can be seen as going through four distinct phases. During which phase did management accounting become more outwardly focused? A. Phase 2 B. Phase 3 C. Phase 1 D. Phase 4
D. Phase 4
With which ONE of the following qualities of management accounting information is the concept of materiality most closely associated? A. Comparability B. Faithful representation C. Verifiability D. Relevance
D. Relevance
