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TLA1 Answers and Additional Notes
TLA1 Answers and Additional Notes
In short, managerial accounting is the provision of accounting information for internal users in
a firm.
In essence, these objectives work together to help organizations effectively manage their
resources, evaluate performance, and make strategic decisions that drive growth and
profitability.
In short, controlling involves monitoring and adjusting organizational activities to ensure they
align with plans. It includes comparing actual performance to targets, identifying deviations,
and taking corrective actions.
Stated in another way: Planning occurs first. Planning requires setting objectives and
identifying the means of achieving those objectives. Then, the results of the plan are
compared with the plan, which is called controlling. Clearly, it is also feedback, in that any
impediments or unexpected occurrences are noted. This feedback is then used to develop the
plan for the next period.
Financial accounting, on the other hand, is concerned with preparing financial statements for
external stakeholders like investors and regulators. It emphasizes historical financial data and
compliance with accounting standards, with a longer time horizon.
8. Explain the role of financial reporting in the development of managerial accounting. Why
has this changed in recent years?
ANSWER:
Financial reporting in managerial accounting involves the preparation and communication of
financial information to aid managers in making informed decisions. It provides insights into
an organization's financial performance, position, and cash flows. Recently, advancements in
technology, globalization, and increased emphasis on transparency have prompted changes
in financial reporting. Digital tools allow faster data processing, while global operations
demand standardized reporting. Moreover, stakeholders now seek real-time, detailed
information, driving the shift towards more frequent and comprehensive reporting.
Thus, Managerial accountants have had to broaden their focus beyond simple financial
reporting to include the gathering of information on all types of costs and the value of the
product or service to customers. These broader costs are used in planning and decision
making.
9. Explain the meaning of customer value. How is focusing on customer value changing
managerial accounting?
ANSWER:
Customer value is the perceived benefits a customer receives from a product or service
relative to its cost. Focusing on customer value is changing managerial accounting by
directing it towards analyzing costs that contribute to enhancing customer experience, using
customer-centric metrics for performance measurement, guiding product development based
on customer preferences, and aligning resource allocation with activities that create customer
value.
It's important because it helps businesses identify and understand the specific activities that
contribute to the creation of value and those that don't. By analyzing the value chain,
companies can optimize processes, reduce costs, and enhance product or service quality,
ultimately improving their competitiveness and profitability.
11. Explain why today’s managerial accountant must have a cross-functional perspective.
ANSWER:
Today's managerial accountants need a cross-functional perspective to understand how
various departments and activities within an organization interconnect. This perspective
enables them to make informed decisions that consider the broader impacts on the entire
business, promoting better coordination, cost control, and value creation across different
functions.
12. Briefly explain the practice of enterprise risk management and the role that can be played
by managerial accountants in enterprise risk management.
ANSWER:
Enterprise risk management is the practice of identifying, assessing, and managing risks that
could affect an organization's ability to achieve its objectives. Managerial accountants play a
vital role by providing financial data and analysis that helps assess and prioritize risks. They
contribute by developing risk models, monitoring financial indicators, and providing insights to
support strategic decisions that mitigate risks and safeguard the organization's financial
health.
13. What is the difference between a staff position and a line position?
ANSWER:
A line position is directly involved in the core activities of an organization, typically responsible
for executing tasks that contribute to its primary goals, such as production or sales. A staff
position, on the other hand, provides support, expertise, and advisory services to line
positions, assisting them in making informed decisions and optimizing operations. Staff
positions often handle functions like human resources, finance, or legal matters.
14. The controller should be a member of the top management staff. Do you agree or
disagree? Explain.
ANSWER:
Agree. The controller, responsible for overseeing financial operations and reporting, should
be a member of top management. This ensures direct access to critical financial data and
insights, facilitating informed decision-making at the strategic level. Their presence helps align
financial strategies with overall business goals and promotes effective communication
between financial functions and broader management objectives.
Yes, it's possible to teach ethical behavior in a managerial accounting course. By discussing
real-world case studies, ethical dilemmas, and ethical frameworks, students can learn to
identify ethical challenges specific to their field. Exploring how ethical choices impact financial
reporting, decision-making, and overall business success can help students develop the skills
and mindset necessary for ethical behavior in managerial accounting.
16. Briefly describe some of the common themes or pressures faced by executives who
commit corporate fraud.
ANSWER:
Common themes or pressures faced by executives who commit corporate fraud include:
Financial Pressures: Executives might face personal financial difficulties or a need to meet
financial targets to maintain stock prices and please investors.
Performance Expectations: High expectations from stakeholders and the market can lead to
fraudulent activities to artificially inflate performance metrics.
Job Security: Fear of job loss or demotion can drive executives to manipulate financial
statements to show favorable results.
Personal Reputation: Executives may fear damaging their reputation or the company's
reputation if financial targets are not met.
Lack of Oversight: Weak internal controls and lax oversight can create opportunities for
fraudulent activities to go undetected.
Short-Term Focus: Executives might prioritize short-term gains over long-term sustainability,
leading to unethical decisions.
Groupthink: Peer pressure or a prevailing culture of fraud within the organization can
influence executives to conform to unethical behavior.
Desire for Power: The pursuit of power and influence can lead some executives to engage in
fraudulent activities to maintain control.
These pressures can sometimes converge, leading individuals to rationalize unethical actions
in an attempt to address perceived challenges or meet expectations.
17. Identify the three forms of accounting certification. Which form of certification do you
believe is best for a managerial accountant? Why?
ANSWER:
The three forms of accounting certification are:
Certified Public Accountant (CPA): Focuses on auditing, tax preparation, and financial
reporting. It's widely recognized and required for some roles, especially in public accounting.
Certified Internal Auditor (CIA): Focuses on internal auditing, risk assessment, and control
evaluation within organizations.
For a managerial accountant, the best certification would likely be the Certified Management
Accountant (CMA). This certification directly aligns with the responsibilities and skills required
in managerial accounting roles, covering areas such as financial planning, analysis, control,
and decision support. It's designed to enhance skills in cost management, budgeting,
performance evaluation, and strategic planning – all crucial aspects of managerial accounting.
However, the choice also depends on the specific industry, career goals, and personal
preferences of the individual.
Additional notes:
1. Are cost accounting, financial accounting, and management accounting interrelated?
Explain.
Answer:
Yes. Financial accounting is for external reporting. Management accounting produces
information for internal users. Cost accounting, on the other hand, prepares the general-
purpose financial statements. Thus, cost accounting attempts to satisfy the costing objectives
for both financial and management accounting. To illustrate:
Financial Accounting ← Cost Accounting → Management Accounting
2. What is cost management, and how does it differ from management accounting and
cost accounting?
Answer:
● Cost management identifies, collects, measures, classifies and reports information that
is useful to managers for determining the cost of products, customers, and suppliers and
other relevant objects and for planning, controlling, making continuous improvements
and decision making.
● Actually, cost management encompasses both the cost accounting and the
management accounting information systems. Cost information provided by traditional
cost accounting, plays an important support role for planning, controlling, and decision-
making. Cost management requires a deep understanding of the companies cost
structure while management accounting is concerned specifically with how cost
information and other financial and non-financial information should be used for
planning, controlling, continuous improvement, and decision-making. To illustrate:
Management Decisions,
Cost Accounting → Cost Management → Accounting → etc.
Uses the cost
provides tools for a deeper information plus other
provides generic
understanding of the financial information
cost information
companies cost structure plus non-financial
information
3. What is the role of the controller in an organization? Describe some of the activities
over which he or she has control.
ANSWER:
* The controller or the chief accounting officer, supervises all accounting departments. Because
of the critical role that management accounting plays in the operation of an organization, the
controller is often viewed as a member of the top management team and encouraged to
participate in planning, controlling, and decision-making activities. As the chief accounting
officer, the controller has responsibility for both internal and external accounting requirements.
4. What role do performance reports play with respect to the control function?
ANSWER:
* Performance reports are accounting reports that provide feedback by comparing planned
(budgeted) data with actual data. Control is usually achieved with the use of feedback.
5. What is the role of cost management with respect to the objective of continuous
improvement?
ANSWER:
* Cost management supports continuous improvement by providing information that helps
identify ways to improve and then reports on the progress of the methods that have been
implemented. It also plays a critical by developing a control system that locks in and maintains
any improvements realized.
6. What is strategic positioning and briefly describe the two general strategies in terms of
strategic positioning.
ANSWER:
Strategic positioning refers to the way a company positions itself in the market to create a
distinct image and competitive advantage. It involves making deliberate choices about how a
company wants to be perceived by customers and how it wants to compete against rivals.