Do You Understand?
Self Test

Managerial vs Financial

After answering the question, place or hover your mouse over your selection to see if it is correct or incorrect.
The correct answerwill display the explanation. To see all the answers at once please click on the link at the bottom of this practice test.

1. A major difference between financial and managerial accounting is
     a. government regulations apply to managerial accountingIncorrect
     b. managerial accounting must follow MAAP and not GAAPIncorrect
     c. managerial accounting reports are used externallyIncorrect
     d. managerial accounting reports are used exclusively by managementThere are no rules or regulations for managerial accounting. Management reports are flexible and are designed to be useful for internal decision making. Management reports are not provided outside the company.

2. Management accounting
     a. is more forward looking than financial accountingIncorrect
     b. is not focused on external reporting requirementsIncorrect
     c. is more concerned with useful information than accurate informationIncorrect
     d. all of the above.All of the above are true with respect to management accounting.

3. Management accounting is directed towards meeting the needs of
     a. regulatory agencies, such as the IRS and the SECIncorrect
     b. external usersIncorrect
     c. internal usersManagement accounting is directed towards helping management, internal users, make decisions. External users, a., b., and d, do not see or use reports prepared specifically for management decision making.
     d. stockholders of the companyIncorrect

4. Financial accounting is directed towards
     a. internal reportingIncorrect
     b. parts of the organization rather than the whole companyIncorrect
     c. reporting that is verifiable and historicalFinancial accounting records, summarizes and reports historical transactions that are verifiable. Reports are then provided to those outside the company. Financial accounting reports are related to the entire company. All other answers are related to managerial accounting.
     d. management needsIncorrect

5. The organization that is primarily responsible for sharing general guidelines for
management accountants is
     a. the internal revenue serviceIncorrect
     b. American Society of Certified Public AccountantsIncorrect
     c. Institute of Certified Management AccountantsIncorrect
     d. Institute of Management AccountantsThe Institute of Management Accountants primary purpose is to share information and provide general guidelines for management accountants. They also sponsor the CMA examination and certification.

6. Ethical standards for managerial accountants are primarily related to the areas of
     a. disclosure, decision making, and planningIncorrect
     b. competence, education, and creativityIncorrect
     c. competence, confidentiality, integrity, objectivityThe four main areas of ethical responsibility for management accountants are listed in c. above.
     d. decision making, planning, education, and competenceIncorrect

7. Managers use the following information for decision making
     a. financial statements since they are more relevantIncorrect
     b. precise informationIncorrect
     c. information relevant to the decision that is being madeIt is the managerial accountant's responsibility to provide whatever financial or qualitative information is necessary to make a good business decision. The information will be relevant to the part of the business that is impacted by the decision, not the total company. The managerial accountant does not have the time luxury for it to be precise. Financial information focuses on past information rather than the future.
     d. information that is relevant to the total organizationIncorrect

8. The process of managing day to day operations is
     a. planningIncorrect
     b. directingDirecting is the process that management does to keep operations running smoothly on a day to day business.
     c. controllingIncorrect
     d. measuringIncorrect

9. An organization chart shows
     a. all areas of responsibility for managersIncorrect
     b. informal communicationIncorrect
     c. formal lines of authority An organization chart shows who reports to who for each major piece of the company, which are formal lines of authority
     d. profitability by departmentIncorrect

10. Allowing lower levels of management to make decisions is
     a. a centralized organizationIncorrect
     b. decentralizationA decentralized organization allows for decision making at lower levels of management. Centralized organizations make all major decisions at the top. The type of structure a company has is dependent on many factors such as the culture of the company, the size of the company, experience of management.
     c. always done in a companyIncorrect
     d. decided on a decision by decision basisIncorrect

11. When following the Standards of Ethical Conduct for Management Accountants,
an accountant who is faced with an ethical decision should first
     a. write a memo describing the issue and publish it in the local newspaperIncorrect
     b. clarify the issue with a competent advisorIncorrect
     c. follow the established procedures of the organization, which normally is to
          discuss the issue with the immediate supervisorAccording to the standards, the accountant should follow established procedures until      they determine the procedures are not resolving the issue. Confidentiality should be maintained.

     d. discuss the issue with all in the company who will listenIncorrect

12. A managerial accountant does not perform which of the following?
     a. prepare budgetsIncorrect
     b. file and prepare tax returns with the IRSThe managerial accountant is responsible for doing all of the above except b. which is done by a financial accountant.
     c. compare actual results to budgetsIncorrect
     d. prepare reports which show individual department performanceIncorrect

13. Which of the following characteristics is related to management accounting?
     a. use of generally accepted accounting principles for all reportsIncorrect
     b. reporting on historical transactionsIncorrect
     c. reporting on various parts of the organizationManagement accounting focuses on providing information to management at various departments within the organization. It is not governed by GAAP for reporting and does not report on the historical results of the organization as a whole. Management accounting is concerned with providing reports for decision making relative to the future.
     d. reporting only on the organization as a wholeIncorrect

14. The process of making decisions about future operations is
     a. planningBy definition, planning is the process of making decisions related to the future.
     b. controllingIncorrect
     c. implementingIncorrect
     d. monitoringIncorrect
 

15. Managers involved in the process of controlling do all of the following except
     a. compare actual results to budgetsIncorrect
     b. identify the cause of differences in budgeted amounts and actual amountsIncorrect
     c. take corrective action Incorrect
     d. revise the budgetRevising the budget is a planning activity. All others listed above are functions of controlling.


Check Your Answers