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Definition and basic concepts of managerial accounting

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1. What is managerial accounting and what are the differences between managerial accounting and financial accounting?

2. What are the main functions of managerial accounting?

3. Why do management accountants should understand their company strategy?

4. Why is managerial accounting relevant to business majors and their future careers?

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1. What is managerial accounting and what are the differences between managerial accounting and financial accounting?

First of all managerial accounting is concerned with providing information to managers, executives etc. for use within the company/organization. It is really rare to find an individual within a company with the title of "management accountant." Many people in the organization play a role in this process. On the other hand, financial accounting is related to reporting financial information to external parties like creditors, stakeholders, regulators etc... Managerial accounting focus on decisions affecting the future, relevance, timeliness, and segment performance but financial accounting emphasizes the ...

Solution Summary

Managerial accounting is defined and compared to financial accounting. Managerial acccounting's main functions and its relation to company strategy, business majors and their future careers are explained.

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Auditing Questions

1. The natural sign of an asset is a:
a. Debit
b. Credit
c. Both
d. None

2. Internal Auditors are referred to as independent auditors.
a. True
b. False
c. Neither

3. The three categories for standards for auditors as set forth by GAAS are general standards, standards of fieldwork, and standards of examination.
a. True
b. False
c. Maybe so

4. Auditing is a systematic process of obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users.
a. True
b. False
c. No way

5 Audit Risk can be composed of the following components shown in the following formula:
a. AR = Debit + Credit
b. AR = IR - CR - DR
c. AR = IR x CR x DR
d. AR = Credit Risk + Inherent Risk + Control Risk

5. Materiality can be defined as follows:
a. When the inverse relationship of rates fluctuates with risk.
b. The amount of error and/or omission that would affect the judgment of a reasonable person.
c. When Detection Risk can no longer be measured.
d. Fraud exists.

6. All of the following consists of Management's Assertions except for:
a. Existence or Occurrence
b. Completeness
c. Rights & Obligations
d. Fraud not yet committed

7. All of the following are auditing procedures for verifying the Management Assertion of Existence/Occurrence:
a. Confirmations
b. Observation, inspection and examination.
c. Preparation of Audit Engagement Letter.
d. Vouching, testing of transactions.

8. Performing Cut-Off procedures is where:
a. Writing up procedures for fraud.
b. Reviewing financial transactions to see they were posted in the proper accounting period.
c. Cutting off the audit ahead of audit schedule.

9. Basic concepts for competence of evidential matter are relevance and reliability.
a. True
b. False
c. Both

10. An Audit Engagement Letter is the same thing as a Management Representation Letter except for the Management Representation Letter is done at the beginning of the audit while the Audit Engagement Letter is done at the conclusion of the audit.
a. Neither
b. False
c. True
11. Audit tests consists of the following except:
a. Tests of controls.
b. Substantive tests
c. Preparation of financial statements.

12. There are two major audit sampling methods, statistical sampling and non-statistical sampling. Statistical sampling is where the auditors specify the sampling risk they are willing to accept and then calculate a sample size that provides the degree of reliability and results are analyzed quantitatively. In non-statistical sampling the sample size is not mathematically determined and auditors use judgment in determining samples selected with the selected samples analyzed on a judgment basis.
a. True
b. False
c. Neither

13. The following are all sampling methods except:
a. Random sampling
b. Systematic selection
c. Bolean nucleaic method
d. Haphazard selection

14. The following are all internal controls in an information technology environment except for:
a. Hardware and software
b. Organizational
c. Security and access
d. Relevance
e. Controls on system development and modification
f. Operations and data control

15. All of the following are internal controls that could be implemented in an information technology environment except for:
a. Physical access and controls
b. Segregation of duties
c. Compliance with material misstatements

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