Managerial Accounting Exam #1 with answers 2023 100% verified

Differences between Financial and Managerial Accounting - There are seven key differences between financial accounting and managerial accounting: Users: Financial accounting reports are prepared for external parties, whereas managerial accounting reports are prepared for internal users. Emphasis on the future: Financial accounting summarizes past transactions. Managerial accounting has a strong future orientation. Relevance of data: Financial accounting data should be objective and verifiable. Managerial accountants focus on providing relevant data even if these data are not completely objective and verifiable. Less emphasis on precision: Financial accounting focuses on precision when reporting to external parties. Managerial accounting aids decision makers by providing good estimates as soon as possible rather than waiting for precise data later. Segments of an organization: Financial accounting is concerned with companywide reports. Managerial accounting focuses on the segment reports. Examples of segments include: product lines, sales territories, divisions, departments, etc.. Managerial accounting-no externally imposed rules: Financial accounting conforms to GAAP and IFRS. Managerial accounting is not bound by GAAP and IFRS. Managerial accounting-not mandatory: Financial accounting is mandatory because various outside parties require periodic financial statements. Managerial accounting is not mandatory. Segment - Segments of an organization: Financial accounting is concerned with companywide reports. Managerial accounting focuses on the segment reports. Examples of segments include: product lines, sales territories, divisions, departments, etc.. Three main functions of management: Planning, Controlling, and Decision Making - Planning involves establishing goals and specifying how to achieve them. Plans are often accompanied by a budget. Controlling involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change. Part of the control process includes preparing performance reports. A performance report compares budgeted to actual results to improve future performance. Decision making involves selecting a course of action from competing alternatives. Many managerial decisions revolve around answering three questions: a. What should we be selling? b. Who should we be serving? c. How should we execute? Budget - A budget is a detailed plan for the future that is usually expressed in formal quantitative terms. Strategy - A strategy is a "game plan" that enables a company to attract customers by distinguishing itself from competitors. Business process - A business process is a series of steps that are followed in order to carry out some task in a business. Value chain - A value chain consists of the major business functions that add value to a company's products and services. Lean production (also known as JIT) - Lean production is a management approach that organizes resources such as people and machines around the flow of business processes and that only produces units in response to customer orders. Lean production is often called just-in-time (JIT) production because products are only made in response to customer orders and they are completed just-in-time to be shipped to customers. Constraint - A constraint (also called a bottleneck) is anything that prevents you from getting more of what you want. The constraint in a system is determined by the step that has the smallest capacity. Theory of constraints - The Theory of Constraints (TOC) is based on the observation that effectively managing the constraint is the key to success. Corporate social responsibility - Corporate social responsibility (CSR) is a concept whereby organizations consider the needs of all stakeholders when making decisions. CSR extends beyond legal compliance to include voluntary actions that satisfy stakeholder expectations.