CHAPTER ONE

1. INTRODUCTION
What Is Management Accounting?
In defining management accounting a logical start is to examine the words
“Management” and “Accounting” separately. Unfortunately, neither of
these words has a single, universally agreed meaning. Management may
be seen to encompass the entire range of activities involved in running an
organization. On the other hand Accounting may be seen to encompass
any of the activities that attempt to gauge the performance of the
organization or to plan for an organization’s performances. Additionally it
may be seen to encompass the traditional accounting roles of stewardship
control, and audit. A layman might think of accounting as being concerned
only with those activities with financial measurements undertaken by those
with the title “accountant” and of management as being concerned with
those activities undertaken by those with the title “managers” neither is the
case in the real world.

Definition 1.2

Management Accounting is the process of identifying measuring, analyzing,

preparing, interpreting and communicating information that managers use to
fulfill organizational objectives.

In this sense, management accounting includes the production of

information useful in running the organization, such information may be:
 Financial or non-financial,
 Accurate or broadly correct,
 Actual (certain) or estimated (uncertain),
 Based in the past or the future,
 Detailed, or highly aggregated form,

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  Presented in any of a variety of spoken or written forms, such as
tables and graphs.
 Related to profits (losses), costs (revenues), volumes, quality
indicators, trends, etc.
Thus, in many senses, an average person might not consider many of the
areas of management accounting as accounting at all.
1.1. Purpose of Accounting System

Definition 1.1
Accounting is the process of identifying, measuring, and communicating
financial information about an entity to permit informed judgments and decisions
by users of the information. It is a system of gathering financial information
about a business and reporting this information to users.

There are six major steps in accounting process:

1. Analyzing - is looking at events that have taken place and thinking
about how they affect the business. Such an economic events or
conditions that directly changes an entity’s financial condition or
results of operation are known as business transactions in
accounting.
2. Recording - is entering financial information about events in to the
accounting system. This can be done manually or using computer,
this days most business use computers to perform routine record-
keeping operations.
3. Classifying - is sorting and grouping similar items and /or events
rather than merely keeping numerous items and /or events all
together.
4. Summarizing - is bringing the various items of information together
to determine a result.
5. Reporting - is telling the results.

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 6. Interpreting -is deciding the meaning and importance of the
information in various reports. This may include percentage analysis
and the use of ratios to help explain how pieces of information relate
to one another.

1.2 .Users of Accounting Information

In the earlier section, we have said that, accounting is a system of gathering
financial information about a business and reporting this information to
decision makers to help make informed decisions. Strictly speaking every
one in a society is engaged in decision making, from the very minor and
personal ones to a very complex and that are overall organizational or even
country level or above that. In most decisions accounting information is
primarily used hence we can say that every one in a society is user of
accounting information. However, with respect to particular entity, users of
accounting information fall in to two categories: Internal Users and
External Users.
1.2.1. Internal Users
These are managers of the entity who use the information
a. For making short-term planning and controlling routine operations
b. For making non-routine decisions and formulating over all policies
and long-range plans.
1.2.2. External Users
These include parties which are external to the organization, do not involve
in the day-to-day operation of the organization, but which have interest in
the financial information of the organization. Examples include:
government, customers, suppliers, creditors, financial analysts, owners,
investors, etc.
Both internal parties (managers) and external parties use accounting
information, but the ways in which they use it differ, the types of accounting
information they demand may also differ.

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 1.3. Describe the difference between Financial Accounting, and Cost
and Management Accounting.
Management accounting as mentioned earlier refers to accounting
information developed for managers. It is the process of gathering;
communicating and interpreting information that helps managers fulfill
organizational objectives. In contrast financial accounting refers to
accounting information developed for use of external parties. It measures
and records business transactions and provides financial statements that
are based on generally accepted accounting principles (GAAP).
Cost accounting provides information for both management accounting and
financial accounting. It measures, analyzes and reports, financial and non-
financial information relating to the cost of acquiring or using resources in an
organization.
For example, calculating the cost of a product is a cost accounting function
that answers financial accountings inventory valuation needs and
management accountings decision-making need such as pricing decision.
Modern cost accounting takes the perspective that collecting cost
information is a function of management accountant. Thus the distinction
between management accounting and cost accounting is not clear-cut, and
different authors use these terms interchangeably; dear learner, by the time
being you must understand the reason for your course naming “ cost and
management” Accounting.

No. Point of difference Management Financial Accounting

Accounting
1 Primary users Organization managers at Outside parties such as
different level investors government, and
also organization managers
2 Freedom of choice No constraints other than Constrained by generally
costs in relation to benefits of accepted accounting

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 improved decisions principles (GAAP).
3 Behavioral Concern about how Concern about how to
implication measurements and reports measure and communicate
will influence manager’s daily economic phenomena.
behavior Behavioral considerations are
secondary
4 Time Focus Future orientation: Formal Past orientation historical
use of budgets all well as evaluation. Eg. 2005 actual
historical records 2006 performance Vs 2006 actual
Eg. Budgets Vs 2006 actual performance
results
5 Time Span Flexible, varying from hourly Less flexible, usually 1-year
to 10 to 15 years or 1 quarter.
6 Reports Detailed Reports concern Summary reports: concern
about details of parts of the primarily with entity as a
entity, products, departments whole
territories, etc
7 Delineation of Field is less sharply defined. Field is more sharply defined.
activities Heavier use of Economics, Lighter use of related
decision science ,and disciplines
behavioral sciences

Table 1.1 Major distinctions between management and Financial

Accounting

1.3 .1 Accounting System

Definition 1:3
An accounting system is a formal mechanism for gathering, organizing, and
communicating information about an organization’s activities. Using one

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accounting system for both financial and management accounting purposes
some times creates problems.
External forces such as income tax authorities and regulatory bodies often
limit management’s choices of accounting methods for external reports.
Many organizations develop systems primarily to satisfy systems often
neglect the needs of internal users.
Satisfying internal as well as external demands for information means that
organization may have to keep more than one set of records, however doing
so, is expensive. Thus, because external financial reports are required by
authorizes (governmental agencies), many organizations do not choose to
invest in a separate system for internal management purposes. Managers
are thus forced to use information designed to meet external user’s needs
instead of information designed for them.
1.3.2. Cost- Benefit and Behavioral Considerations in
Designing an Accounting System
Managers are continually face resource-allocation decisions, such as
whether to purchase a new software package or hire a new employee.
The cost-benefit philosophy states that resources should be spent if they
are expected to better attain company goals in relation to the expected
costs of those resources. In other words, the expected benefits from
spending should exceed the expected costs. The problem with this
approach is that the expected benefits and costs may not be easily
quantified. Nevertheless, the cost-benefit approach is useful for making
resource- allocation decisions.
Dear learner let me turn you back to the issue of accounting system. As
you may recall from previous section paragraph, Accounting systems are
economic goods- they cost money. So, by applying the cost-benefit
approach, weighing estimated costs against probable benefit is the primary
consideration in choosing among accounting system and methods.
Therefore as manager of one organization you need to consider accounting
systems to be economic goods-like office supplies or labor available at

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various costs. Which system does a manager want to buy? Look at the
following representation:

Accounting system costs and Benefits

Benefits Costs

Benefit
> Costs Obtain the system

Benefits < Costs Seek alternative

In addition to the costs and benefits of an accounting system, the buyer of

such a system should also consider behavioral implications, that is, the
system’s effect on the behavior (decisions) of managers. The system must
provide accurate, timely budgets and performance reports in a form useful
to managers. If managers do not use accounting reports, the systems
create no benefit.
Management Accounting reports affect employees’ feelings and behavior.
Consider for example, performance reports that are used to evaluate the
operations under the responsibility of a particular manager. If the system
attributes excessive costs to the operation, the manager may lose
confidence in the system and not let it influence future decisions. In
contrast a system that manager believes in and trust can be a major
influence on their decisions and actions.
In a nutshell management accounting can best be understood as a balance
between costs and benefits of accounting information coupled with an
awareness of the importance of behavioral effects.

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1.4. Distinguish Between the Planning and Control
Decisions of Managers
Dear learner look at the following diagram and try to grasp how accounting
helps managers in planning and control function.

Management Management
Decision Accounting
System

Planning Budgets

Control Accounting
System

Performance Performance
Evaluation Reports
Planning and Control process
The Nature of Planning and Control
The management process is a series of activities in a cycle of planning and
control. Decision-making, which is the purposeful choice from among a set
of alternative courses of action designed to achieve some objective-is the
core of management process.
Decisions with in an organization are often divided in to two types:
1. Planning Decisions
2. Control Decisions
In practice, planning and control are so intertwined that it seems artificial to
separate them.
Planning- is setting goals, predicting results and deciding to attain goals.

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 Control- is deciding and taking actions, it is deciding on performance
evaluation and feed back.
Budgets- are quantitative expressions of proposed plan of actions. Budgets
aid in the coordination and implementation of the plan.
Performance Reports- are reports that compare actual results with
budgeted amounts.
Example of performance Report

Boone shop, July 2003

Budget Actual Variance
Revenues 59,000 60,000 1000F
Cost of good sold 42000 43,400 1400U
Wages Expense 6700 7,000 3000U
General Expense 1300 900 400F
Fixed Costs 5000 5000 0
Operating Income 4000 3700 300U

The accounting system supports planning and controlling function and is a

key source for performance reports. Accounting formalizes control as
performance report, which provides feedback by comparing results with
plans and by highlighting variances, which are deviations from plans. Based
on their evaluation, managers would make corrections and revisions to their
plans. Performance reports are used to judge decisions and the productivity
of organizational units and manager. By comparing actual results to
budgets performance report motivate manager to achieve budgeted
objectives.
Performance reports spur investigation of exceptions-items for which actual
amounts differ significantly from budgeted amounts. Operations are then
made to conform to the plans, or the plans are revised. This is often called
management by exception, which means concentrating on areas that
deviate from the plan and ignoring areas that are presumed to be running

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smoothly. Thus, the management-by-exception approach frees managers
from needless concern with those phases of operations that are adhering to
plans. However, well-conceived plans should incorporate enough discretion
or flexibility so that the manager may feel free to peruse any unforeseen
opportunities. In other words, control should not be a straight jacket. When
authorized in the plan, managers should be able to take these actions.

1.5. Distinguish Among the Problem Solving, Scorekeeping

and Attention-Directing Roles of Accounting Information
Management accountants contribute to the company’s decision about
strategy, planning and control by problem solving, scorekeeping, and
attention directing.
1.5.1.Problem solving
This involves comparative analysis for decision making. This role asks: of
the several alternatives available, which is the best? This aspect of
accounting quantifies the likely results of possible courses of action and
often recommends the best course to follow.
Example of Problem solving- Comparison of the expected revenues and
costs of installing different machines with in the company.
1.5.2.Scorekeeping
Accumulating, classifying and reporting results to managers describing
how the organization is doing and how well it is implementing its
strategy. This involves accumulating data and reporting reliable results
to all levels of management. This role enables both internal and external
parties to evaluate organizational performance. It asks the question:
How is the business doing? Example: Comparison of actual revenue
with the budget or comparison of actual revenue from period to period.
1.5.3.Attention Directing-
This is reporting and interpreting information that helps managers to
focus on operating problems, imperfections, inefficiencies, and

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 opportunities. Attention directing is commonly associated with current
planning and control, and with the analysis and investigation of recurring
routine internal accounting reports.
This involves helping managers properly focus their attention. This role
asks: Which opportunities and problems should be emphasized first.
Attention directing reports direct manager’s attention to situations that
need resolution. The management accountant not only directs attention
to problems but also to opportunities that would add value to a company.
Different decisions place different emphasis on these three roles. For
strategic decisions and planning decision, the problem-solving role is
most prominent. For control decisions-decisions which include both
actions to implement planning decision and decision about performance
evaluation, the scorekeeping and attention directing roles are most
prominent because they provide feedback to managers. Feedback from
scorekeeping and attention directing often leads managers to revise
planning decisions and sometimes to make new strategic decisions.
Information that prompts a planning decision is frequently reanalyzed
and supplemented by the management accountant’s roles. The ongoing
interaction among strategic decisions, planning decisions, and control
decision means that management accountant is simultaneously doing
problem solving, scorekeeping, and attention-directing activities.

Activity 1:4
Dear learners before proceeding with the next section, distinguish between the
problem solving, score keeping, and attention-directing role of management
accountant.
Learning Objective Six

1.6. Identify Themes Managers to Consider for Attaining

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 Success

Activity 1:5

Dear student, how wonderful is being successful? Every body desire success in
her/his life…the same is true for organizations. All organizations strive for success;
though success may be defined by different organization differently based on their
goals and objectives. Pretty student, now let me ask you a couple of question, please
take time and try to respond to these questions before proceeding with the next
section.
Question1. What is considered as success for your self in your life?
Question2. What is considered as success for your organization or any
organization you know?
Question3. What are the key factors that you or the manager of the
organization should consider in order to attain the desired success?

Dear student, you know, what you consider as your success, and ways of
achieving it too. In the following paragraphs, you will be presented with key
themes in management decision-making. Look at the following Exhibit.

Customer Focus

Value chain Continuous

and Key success Factors: improvement
Supply chain Cost and Efficiency and
analysis Time, Quality Benchmarking
Innovation

Exhibit 1:2 themes that managers should consider for attaining success

1.6.1. Customer Focus

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 This day the challenge facing managers is to continue investing sufficient
(but not excessive) resources in customer satisfaction such that profitable
customers are attracted and retained.
1.6.2. Value Chain Analysis:
This refers to the sequence of business functions in which customer
usefulness is added to products or services.

Research Design of products, Production Marketing Distribution Customer

And Services, or process Service
Development

Management Accounting

Exhibit 1:3 Managers indifferent parts of the value chain

1. Research and Development: Generating and experimenting with
ideas related to new products, services or process. At SONY, for
example, this function includes research on alternative television
signal transmission and on the clarity of different shapes and
thickness of television screen.
2. Design of Products, Services or Process - Detailed planning and
engineering of products, services or process. Design at SONY
include determining the number of component parts in television set
and the effect of alternative product designs on quality and
manufacturing costs.

3. Production - Acquiring, coordinating and assembling resources to

produce a product or deliver a service. Production function in SONY

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 includes the acquision and assembly of the electronic parts, the
cabinet, and the packaging used for shipping.
4. Marketing - Promoting and selling products or services to customers
or prospective customers. SONY Company for example, markets its
televisions through trade shows, advertisements in newspaper, and
on Internet.
5. Distribution - Delivering products or services to customers.
Distribution for SONY includes shipping to retail outlets, catalog
vendors, direct sales via Internet, and other channels, through which
customer purchase televisions.
6. Customer Service - providing after-sale support to customers.
SONY provides customer service on televisions in the form of
customer-help telephone lines, support on the Internet, and warranty
repair work.
Each of these business functions are essential to a company satisfying
its customers and keeping them satisfied (and loyal) overtime. Exhibit
1:3 depicts the usual order in which different business-function activities
physically occur. However do not interpret as implying that managers
should proceed sequentially through the value chain when planning and
managing their activities. Management accountants track the costs
incurred in each value-chain category. This goal is to reduce costs in
each category and to improve efficiency. Cost information also helps
manager’s make-cost-benefit tradeoffs. For example, it helps to answer
questions like, is it chapter to buy products from outside vender or to do
manufacturing in-house?

Activity 1.6

Pretty student, what are the components of value chain in your organization or
any organization you know? List activities for each component.

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1.6.7. Supply chain Analysis
Companies can also implement strategy, cost cuts, and create value by
enhancing their supply chain. The term supply chain describes the flow of
goods or services and information form the initial sources of materials and
services to the delivery of products to customers regardless of whether
those activities occur in same organization or in other organizations. Cost
management emphasizes integrating and coordinating activities across all
companies in the supply chain, as well as across each business function in
an individual company’s value chain, to reduce costs.
In general supply chain and value chain analysis theme have two related
aspects:
1. Treat each of the business functions in the value chain as an
essential and value contributor.
2. Integrate and coordinate the efforts of all business functions in
addition to developing the capabilities of each individual business
function.
1.6.8. Key success factors
These are factors that directly affect the economic viability of the
organization.
 Cost - Organizations are under continuous pressure to reduce costs.
To calculate and manage the cost of products, the management
accountant tries to understand the tasks or activities that cause
cost to arise.
Quality- Customers expect high levels of quality. Total quality
management (TQM) is a philosophy in which management improves
operations through-out the value chain to deliver products and services that
exceed customer expectations.
 Time – Organizations are under pressure to complete activities faster
and to meet promised delivery dates more reliable.

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  Innovation – There is now heightened recognition that a continuing
flow of innovative products or services is a prerequisite to the
ongoing success of most organizations.
 Continuous Improvements and Benchmarking continuous
improvement by competitors creates a never –ending search for
higher levels performance within many organizations.
Learning Objective 7
1.7. Contrast the Role of Treasurer and controller
Look at the following partial organization chart of manufacturing company
(Introduction to management accounting, Horngren, p.16)

President

Sales Vice president Engineering Vice Manufacturing Financial

President Vice President VicePresident

Treasurer

Controller
To assist other managers in decision-making vital to an organization’s
success, most organizations employ a variety of accounting personnel with
various types of authority and responsibility.
Dear, student in the following few paragraphs we will discuss this authorities
and responsibilities, good reading….

Line and Staff Authority

The above partial organization chart shows how a typical manufacturing
company divides responsibilities. Line authority is authority which is exerted

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downward over subordinates. Staff authority is authority to advise but not
command. It may be exerted downward, laterally, or upward.
The top accounting officer of an organization is often called the controller
or respectably in a government organization a comptroller. The controller
position varies in nature and duties from organization to organization. In
some firms, the controller is confined to compiling data, primary for external
reporting purposes. In others, the controller is a key executive who aids
managerial planning and control throughout the company’s subdivisions. In
most firms, controllers have a status somewhere between these two
extremes.
Although controllers have a staff role, they are generally empowered by the
firm’s president to approve, install, and oversee, the organization’s
accounting system to ensure uniform accounting and reporting methods. In
theory, controllers have no line authority except over the accounting
department. Yet by reporting and interpreting relevant data, controllers do
exert a force or influence that leads management toward logical decisions
that are consistent with the organization’s objective.
Many people confuse the office of controller and treasurer, as can be seen
from the partial organization chart these are both functions which report to
financial vice president, i.e, they boot are at equal level in the organization
chart.

Basic distinction between controller and Treasurer

Controller Treasurer

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1. Planning for control 1. Provision of capital
2. Reporting and Interpreting 2. Investor relation
3. Evaluating and Consulting 3. Short-term financing
4. Tax administration 4. Banking and Custody
5. Government Reporting 5. Credit and Collection
6. Protection of assets 6. Investments
7. Economic appraisal 7. Risk management (Insurance)

Table 1:2- Distinguishing roles of controller and Treasurer

Dear student, as you can observe from the table above treasurer is
concerned mainly with the company’s financial matters, where as the
controller with the operating matters. The exact division of accounting and
financial duties varies from company to company, in a small organizations;
the same person might be both treasurer and controller.

Activity 1:7
Pretty student, please think of this roles in your organization, or any organization
you know?

Learning Objective 8
1.8. Identify the Current Trend in Management Accounting
Accounting system in general must able to change to recognize the realities
of today’s complex, technical, and global business environment. These
days instead of merely pointing out problems, the accountants become part
of the solution. In essence, management accountants today are internal
consultants rather than merely prepares of reports.
The three major factors which are causing changes in management
accounting today:
1. Shift from a manufacturing-based to a service based economy.
2. Increased global competition
3. Advances in technology

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Each of these factors affects and will affect the study of management
accounting.
The service industries are becoming increasingly competitive, and their
use of accounting information is growing. Global competition has increased
in recent years as many international barriers to trade, such as tariffs and
duties have been lowered. In addition, there has been a world wide trend
toward deregulation. The result has been that, today all managers need a
better understanding of accounting information than they may have needed
in the past. In addition, accountants need to create databases that can be
readily understood by managers.

Technological change has had a dramatic effect on the manufacturing

environment for many companies; in turn changing in how accounting
information is used. Manufacturing processes are increasingly automated,
making extensive use of robots and other computer controlled equipment
and less use of human labor for direct production activities. Many early
accounting systems were designed primarily to measure and report the cost
of labor. This is because human labor was the largest cost in the production
of many products and services. Clearly such systems are not appropriate in
automated environments; hence accountants in such settings have had to
change their systems to produce information for decisions about how to
acquire and use materials and automated equipment efficiently.
Learning Objective 9
1.9. Understand What Professional Ethics Mean To
Management Accountants

Although accounting systems may change, the need for accountants to

adhere to high ethical standards of professional conduct has never been
greater.

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Preparing objective, accurate external and internal financial reports is
primarily the responsibility of line managers. However, management
accountants are also responsible for the reports. Ensuring that accounting
system, procedures, and compilations are reliable and free of manipulation
is the responsibility of every accountant.
Standards of Ethical Conduct for Practitioners of
Management Accounting
Practitioners of management accounting have an obligation to the public,
their profession, the organization they to maintain the highest standards of
ethical conduct. In the recognition of this obligation, the institute of
management Accountants has promulgated the following standards of
ethical conduct for practitioners of management accounting. Adherence to
these standards is integral to a achieving the objective of management
Accounting.
Partialness of management accounting shall not commit acts contrary to the
following standards:
1.9.1. Competence
Practitioners of management accounting have a responsibility to:
 Maintain an appropriate level of professional competence by
ongoing development of their knowledge and skill.
 Perform their professional duties in accordance with relevant laws,
regulations, and technical standards.
 Prepare complete and clear reports and recommendations after
appropriate analyses of relevant and reliable information.
1.9.2. Confidentiality
Practitioners of management accounting have a responsibility to:
 Refrain from disclosing confidential acquired in the course of their
work except when authorized, unless legally obligated to do so.

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  Inform subordinates as appropriate regarding the confidentiality of
information of acquired in the course of their work and monitor their
activities to assure the maintenance of confidentiality.

 Refrain from using or appearing to use confidential information

acquired in the course of their work for unethical or illegal
advantage of either personally or through third parties.

1.9.3. Integrity
Practitioners of management Accounting have responsibility to:
 Avoid actual or apparent conflicts of interest and advise all
appropriate parties of any potential conflict.
 Refrain from engaging in any activity that would prejudice their
ability to carryout their duties ethically.
 Refuse any gift, favor, or hospitality that would influence or would
appear to influence their actions.
 Refrain from either actively or passively subverting the attainment
of the organization’s legitimate and ethical objectives.
 Recognize and communicate professitional limitations or other
constraints that would preclude responsible judgment or successful
performance of an activity.
 Communicate unfavorable as well as favorable information and
professional judgment or opinions.
 Refrain from engaging in or supporting any activity that would
discredit the profession.
1.9.4. Objectivity
Practitioners of management Accounting have responsibility to:
 Communicate information fairly and objectively.

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  Disclose fully all-relevant information that could reasonably be
expected to influence an intended user’s understanding of the
reports, comments, and recommendations presented.
1.10. Self Examination Questions- Answers at End
I. True or False
1. Management and financial Accounting have the same goal
2. Cost Accounting provides information only for management
accounting purpose.
3. The budget is a qualitative expression of the proposed
management plan of action.
4. Cost-benefit approach states that resources should be spent if
they will better attain the company’s goal in relation to the
expected costs of resources.
5. The value chain describes the flow of goods, services, and
information from the purchase of material to the delivery of
product to customers, regardless of whether these activities
occur in the same organization or with other organization.
II. Choice
1. Role of accounting which involves accumulating data and reporting
results to all management levels that describe how the organization is
doing.
A. Problem solving
B. Score keeping
C. Attention-directing
D. Planning
E. Controlling
2. Innovation and quality would be considered under the ------------theme
that a manger considers for attaining success.
A. Customer focus
B. Key success factors
C. Value chain and supply chain analysis

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 D. Continuous improvements and bench marking
E. None
3. Ethical standard designated to avoid actual or apparent conflicts of
interest is
A. Competence
B. Confidentiality
C. Integrity
D. Objectivity
E. None
4. Which one of the following would be considered a primary user of
management accounting information?
A. Stockholders
B. Controller
C. Creditor
D. Supplier
E. Customer
5. Which one of the following would be considered an external user of the
firm’s accounting information?
A. President
B. Controller
C. Stockholder
D. Sales manager
E. Treasurer

1.11. Chapter One Assignment

1. For each of the following activities, identify the function that
the accountant is performing as:
a. Score keeping
b. Attention directing
c. Problem solving
Activities:

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 1. Analyzing for an Alcoa production superintendent, the impact on
costs of some new drill presses.
2. Preparing a scrap report for the finishing department of a Nissan
parts factory
3. Preparing the budgets for the maintenance department of
providence Hospital.
4. Interpreting why Springfield foundry did not adhere to its production
schedule.
5. Explaining the stamping department’s performance report
6. Preparing a monthly statement of European sales for the General
motors marketing vice president
7. Preparing for a manager of production control of an Inland steel
plant, a cost plant, a cost comparison of two computerized
manufacturing control systems.
8. Interpreting variances on the Harvard University purchasing
department’s performance report.
9. Analyzing for a Honda international manufacturing manager, the
desirability of having some auto parts made in Korea
10. Preparing a schedule of depreciation for forklift trucks in the
receiving department of a General Electric factory in Scotland.
2. Consider the following short descriptions. Indicate whether each
description more closely related to a major feature of Financial or
Management Accounting.
1. Provide internal consulting advice to managers
2. Has less flexibility
3. Has future Orientation
4. Is characterized by detailed reports
5. Field is more sharply defined
6. Is constrained by generally accepted accounting
7. Behavioral impact is secondary
1.12. Answers to self Examination Questions:

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 I. True or False

1. False
2. False
3. False
4. True
5. True

II. Choice

1. B
2. B
3. C
4. B
5. C

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