BASIC CONCEPTS IN MANAGERIAL ACCOUNTING

1. The main concept of managerial accounting is:

a. decision making c. the preparation of financial statements.
b. the preparation of budgets. d. documenting cash flows.
2. Which of the following functions is most directly related to management by objective?
a. Reporting c. Decision making
b. Control d. Planning
3. The setting of objectives and the identification of methods to achieve those objectives is called:
a. planning c. control
b. decision making d. product evaluation
4. In the planning and control process, what is the proper sequence of events?
a. Set goals, set objectives, develop plans, implement plans, evaluate performance
b. Establish a master budget, set standard costs, develop variance analysis
c. Develop engineered costs, develop pricing targets, calculate contribution margins
d. Identify variable costs, identify fixed costs, project sales -mix, determine breakeven
5. The primary objective of management accounting is to provide:
a. Stockholders and potential investors with useful information for decision making.
b. banks and other creditors with information useful in making credit decisions.
c. management with information useful for planning and control of operations.
d. supervising government agencies with information about the company’s management affairs.
6. Management accounting information
a. uses historical cost as the basis for reports to managers who are making decisions about future courses of action.
b. should be developed and provided only if the benefits exceed the costs.
c. does not reflect the financial criteria of verifiability or consistency.
d. should serve the basic needs of investors and creditors.
7. Which of the following is included in the day-to-day work of the management team?
a. Decision making c. Planning
b. Controlling d. All of the above
8. Which of the following statements is true in comparing management accounting to financial accounting?
a. Managerial accounting places more emphasis on precision than financial accounting.
b. Both are highly dependent on timely information.
c. Both rely on the same accounting information system.
d. Managerial accounting is concerned with external decision making.
9. Which of the following is true of managerial accounting rather than financial accounting?
a. The outputs of this accounting system are the basic financial system.
b. The methods of this accounting system are established by an overseeing board.
c. The accounting methods are standardized to allow comparison among companies.
d. The accounting system would be unique to each company.
10. Management Accounting’s role in the control process is to provide:
a. managers with information that can be used to determine customer satisfaction levels.
b. investors and creditors the information about financial stability of the company.
c. managers with relevant information to compare actual results with expectations.
d. input to managers of the best ways to achieve continuous improvement in the production process.
11. Which of the following statements is (are) true regarding financial and managerial accounting?
I. Both are mandatory
II. Both rely on the same underlying financial data.
III. Both emphasize on the segments of an organization rather than looking at the organization as a whole.
IV. Both are geared to the future, rather than to the past.
a. I, II, III and IV
b. Only II, III and IV
c. Only II and III
d. Only II
12. Which of the following statement is FALSE?
a. Managerial accounting need not mostly conform to PFRS.
b. Financial accounting reports focus on the subunits of the organization.
c. Managerial accounting is not required.
d. Managerial accounting focuses on the needs of internal users.
13. For internal users, managers are more concerned with receiving information that is:
a. completely objective and verifiable c. completely accurate and precise
b. relevant, flexible and immediately available d. relevant, completely accurate, and precise
14. Which of the following statements is correct?
a. A certified public accountant can readily render management advisory services to the public.
b. A CPA with MBA and DBM degrees is automatically qualified to render management advisory services.
c. Competence as a standard in the rendition of management advisory services by a CPA may be equated to having
excellent scholarly preparation to include the usual baccalaureate, an MBA and other post graduate studies.
d. Adequate training and experience in both the analytical approach and process in a particular undertaking are
requisites for the CPA to be involved in a management advisory service engagement.
15. The following characterize management advisory services except:
a. It involves decision for the future.
b. It is broader in scope and varied in nature.
c. It utilizes more junior staff than senior members of the firm.
d. It relates to specific problems where an expert’s help is required.
16. Which of the following statements is incorrect?
a. CPAs provide management advisory services to go around the ethical constraints as mandated by the accounting
profession.
b. Businesses hire management consultants to help define specific problems and develop solutions.
c. CPAs who are performing management advisory services may be considered to be in the practice of management
consulting.
d. Included in the practice of consulting is the provision of confidential service in which the identity of the client is
concealed.
17. The primary purpose of management advisory services is to
a. conduct special studies, preparation of recommendations, development of plans and programs, and provision of
advice and assistance in their implementation.
b. provide services or to fulfill some social needs.
c. improve the client’s use of its capabilities and resources to achieve the objectives of the organization
 d. earn the best rate of return on resources entrusted to its care with safety of investment being taken into account and
consistent with the firm’s social and legal responsibility.
18. The major reporting standard for presenting managerial accounting information is:
a. Relevance c. Generally accepted accounting principles
b. The Cost Principle d. The current tax law
19. With respect to the time dimension, how does managerial decision compare with the external performance evaluation?

DECISION EXTERNAL
MAKING PERFORMANCE
a. Past Past

b. Past Future

c. Future Past

d. Future Future
20. Which of the following activities is not usually performed by a
management accountant?
a. Assisting managers to interpret data in managerial accounting reports.
b. Designing systems to provide information for internal and external reports.
c. Gathering data from sources other than the accounting system.
d. Deciding the best level of inventory to be maintained.
21. How does managerial decision making compare with external performance evaluation?

DECISION MAKING EXTERNAL PERFORMANCE

a. Detailed More aggregated
b. Detailed Detailed
c. More aggregated More aggregated
d. More aggregated Detailed
22. Management accountants will not
a. assist in budget planning c. prepare reports primarily for external users.
b. determine cost behavior d. be concerned with the impact of cost and volume on profits.
23. In the contemporary business environment, cost management focuses on
a. financial reporting and cost analysis
b. common emphasis on standardization and standard costs
c. development and implementation of the business strategy.
d. All of the given choices
24. Management accounting is similar to financial accounting in that both:
a. are governed by financial reporting framework.
b. deal with economic events.
c. concentrate on historical data.
d. classify reported information in the same manner.
25. Managerial accounting provides data to achieve all of the following objectives except:
a. planning and control costs c. supporting management planning
b. compliance with SEC reporting requirements d. determining the cost of products
26. Internal reports must be communicated:
a. daily b. monthly c. annually d. as needed
27. Which consideration influences the frequency of an internal report?
a. the wishes of the managers receiving the report.
b. the frequency with which decisions that require the information are made
c. the cost of preparing the report d. all of the given choices
28. Which of the following statements about internal reports is not true?
a. The content of internal reports may extend beyond the double entry accounting system.
b. Internal reports may show all amounts at market value.
c. Internal reports may discuss prospective events.
d. Most internal reports are summarized rather than detailed
29. The informational needs of internal users/management
a. are historical in nature c. emphasize the company as a whole.
b. emphasize accuracy over timelines d. may require more customized reports rather than external financial statements
30. Which of the following is most associated with managerial accounting?
a. Must follow generally accepted accounting principles c. May rely on estimates and forecasts
b. Is prepared for users outside the organization d. Always reports on the entire entity.
31. Which statement about the extent of detail in a management accounting report is true?
a. It may depend on the frequency of the report c. It depends on the type of manager receiving the report.
b. It depends on the level of the manager receiving the report d. All of the given choices
32. Which of the following characteristics is inherent to management accounting?
a. Reporting of historical information c. Compliance to generally accepted accounting principles.
b. Contribution approach income statement. d. External users of financial report.
33. In order to be useful to managers, management accounting reports should possess all of the following characteristics
except:
a. Provide objective measures of past operations and subjective estimates about future decisions
b. Be prepared in accordance with generally accepted accounting principles
c. Be provided at any time management needs information
d. Be prepared to report information for any unit of the business to support decision making
34. Which ethical standard of conduct requires that a managerial accountant be responsible to prepare complete and clear
reports and recommendations are based on appropriate analyses of relevant and reliable information?
a. competence c. confidentiality
b. integrity d. objectivity
35. Which ethical standard of conduct requires the managerial accountant have to communicate information fairly and
objectively?
a. competence c. confidentiality
b. integrity d. objectivity
36. Under which ethical standard of conduct does the managerial accountant have the responsibility to refuse any gift, favor,
or hospitality that would influence or appear to influence his or her decision?
a. competence c. confidentiality
b. integrity d. objectivity
37. Under which ethical standard of conduct does the managerial accountant have the responsibility to refrain from either
actively or passively subverting the attainment of an organization’s legitimate and ethical objectives?
a. integrity c. competence
 b. objectivity d. confidentiality
38. Under which ethical standard of conduct does the managerial accountant have the responsibility to disclose fully all
relevant information that could reasonably be expected to influence an intended user’s understanding of the reports,
comments, and recommendations presented?
a. objectivity c. competence
b. confidentiality d. integrity
39. For managerial decision purposes, the volume of information should be evaluated on the basis of
a. cost-benefit relationship c. a cost, but not a benefit
b. a benefit, but not a cost d. neither costs nor benefits, but some other criteria
40. The first step in managerial decision making is to:
a. specify the standard or expected outcome c. gather information about the consequence of each alternative.
b. identify a problem d. list alternative courses of action.

41. In a broad sense, cost accounting can be defined within the accounting system as
a. internal and external reporting that may be used in making non-routine decisions and in developing plans and
politics.
b. external reporting to government, various outside parties, and stockholders.
c. internal reporting for use in management planning and control, and external reporting to the extent its product-
costing function satisfies external reporting requirements.
d. internal reporting for use in planning and controlling routing operations.
42. The cost management function is usually under the:
a. chief information officer b. treasure c. purchasing manager d. controller
43. If a distinction is made between cost accounting and managerial accounting, managerial accounting is more oriented
toward
a. valuation of inventory c. analysis of variances including spoilage
b. financial reporting to third parties d. the planning and controlling aspects of the management process
44. Which of the following does not describe managerial accounting?
a. internally focused b. emphasis on the future c.externally focused d. detailed information
45. The managerial function of controlling
a. is performed only by controller of a company c. is only applicable when the company sustains a loss.
b. is concerned mainly with operating a manufacturing segment d. includes performance evaluation by management.
46. Planning is a function that involves
a. hiring the right people for a particular job c. coordinating the accounting information system.
b. setting goals and objectives for an entity d. analyzing financial statements.
47. In determining whether planned goals are being met, a manager is performing the function of
a. planning b. controlling c. motivating d. follow-up.
48. Managerial accounting creates value by:
a. by forcing managers to analyze historical figures and interpret the results.
b. by eliminating all pricing and costing errors.
c. by focusing managers’ attention on the relationship between financial and non-financial factors.
d. all of the given choices
49. Which of the following best describes what performance evaluation should be designed to do?
a. Modify goal and objectives each month c. Establish sales goals and targets
b. Compare actual results to plan d. Establish blame
50. Which of the following is a staff position?
a. vice-president of production c. vice-president of marketing
b. vice-president of finance d. plant foreman
51. Which management position is responsible for raising capital?
a. Internal Auditor b Treasurer c. Controller d. Chief Financial Officer
52. Each of the following would be considered a staff function EXCEPT the:
a. vice-president of finance c. vice-president of corporate planning
b. vice-president of research and development d. vice-president of marketing
53. Management accountants generally exercise which type of authority?
a. Company b. Functional c.Line d. Staff
54. The treasurer function is usually not concerned with
a. investor relations c. financial reports
b. short-term financing d. credit extension and collection of bad debts
55. Which of the following duties is usually assigned to the controller?
a. diverting the granting of credit to clients c. investing the organization’s funds
b. tax planning d. independently evaluating the firm’s financial statements
56. Developing a company strategy for responding to anticipated new markets is an example of:
a. decision making b. controlling c. planning d. motivating
57. Deciding whether to sell a product or process it further is an example of a(n):
a. controlling activity b. operating activity c. planning activity d. none of the given choices
58. Obtaining feedback is generally identified most directly with the management function of
a. planning b. directing and motivating c. controlling d. decision making
59. A staff position:
a. relates directly to the carrying out of the basic objectives of the organization.
b. is supportive in nature providing service and assistance to other parts of the organization.
c. is superior in authority to a line position.
d. none of these.
60. Which of the following statements is true regarding ethics in decision making?
a. Since most business decisions are simply a matter of economics, ethical considerations should be ignored.
b. Decision-making can have an ethical as well as an economic impact.
c. Managerial accountants do not face ethical issues.
d. Business managers will always agree on ethical choices.