Chapter 1

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 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

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

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

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

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