Question Tag: Management Accounting

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ICMA – Nov 2024 – L1 – Q3b – Relevant Cost Concepts

Explains two key concepts of relevant cost used in decision-making.

Question

Relevant Cost
Relevant cost should be used for assessing the economic and financial consequences of any decision made by management. Only relevant cost and benefits should be taken into consideration when evaluating the financial consequences of a decision.

Required:
Explain TWO key concepts of relevant cost.

Answer

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Tags: Costs, Financial Decision-Making, Management Accounting, Relevant Cost
Level: Level 1

Topic: Relevant Cost and Revenue
Series: Nov 2024

PM – May 2019 – L2 – Q6 – Strategic Management Accounting

Discusses the essential qualities needed for management accounting information to be useful for decision-making.

Question

“The purpose of management accounting is to provide relevant and reliable information so that managers can make well-informed decisions. The value of management accounting, therefore, depends on the quality of the information provided and whether this information helps managers to make better decisions.” Therefore, before management accounting information can be useful to managers, it must possess some qualities.

Required:
Discuss the essential qualities of good management accounting information.

Answer

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Tags: Accounting principles, Decision Making, Information Quality, Management Accounting
Level: Level 2

Topic: Strategic Management Accounting
Series: MAY 2019

FA – Nov 2013 – L1 – SA – Q33 – Roles of Accountants in Business and the Economy

Understanding the branch of accounting that provides information to management.

Question

The branch of accounting that offers financial and operating information to the firm’s management to help in planning, controlling, and taking decisions is called ____________.

Answer

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Tags: Business Management, Financial Information, Management Accounting
Level: Level 1

Topic: Roles of Accountants in Business and the Economy
Series: NOV 2013

MI – May 2018 – L1 – SA – Q1 – Introduction to Cost Accounting

Identifying non-functions of cost accountants in an organization.

Question

Which of the following is NOT a function of the Cost Accountant?
A. Advising management on cost control
B. Preparing budgets
C. Purchasing materials with the cheapest costs
D. Compiling cost of production
E. Allocating indirect expenses to manufactured products

Answer

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Tags: Cost Accounting, Functions, Management Accounting
Level: Level 1

Topic: Introduction to Cost Accounting
Series: MAY 2018

MI – Nov 2014 – L1 – SA – Q10 – Introduction to Cost Accounting

Identify which report is NOT the responsibility of a Management Accountant.

Question

Which of the following reports is NOT the responsibility of a Management Accountant?

A. Operating Statement
B. Cash Flow Statement
C. Statement of Assets and Liabilities
D. Statement of Profitability Analysis
E. Statement of Costs and Variance Returns

Answer

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Tags: Accountability, Financial Reports, Management Accounting
Level: Level 1

Topic: Introduction to Cost Accounting
Series: NOV 2014

BMF – Nov 2023 – L1 – SA – Q13 – Business and Organizational Structures and Choices

Identify which field is concerned with internal reporting to decision-makers.

Question

Which of the following is concerned with internal reporting to decision-makers?

A. Financial management
B. Financial accounting
C. Strategic management performance
D. Management accounting
E. Finance

Answer

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Tags: Decision Making, Internal Reporting, Management Accounting
Level: Level 1

Topic: Business and Organizational Structures and Choices
Series: NOV 2023

FA – Nov 2023 – L1 – SB – Q1B – Roles of Accountants in Business and the Economy

Describe various types of accounting and their roles.

Question

Explain the various types of accounting and their respective roles in providing relevant information to different users of financial information.

Answer

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Tags: Cost Accounting, Financial Accounting, Management Accounting, Tax Accounting
Level: Level 1

Topic: Roles of Accountants in Business and the Economy
Series: NOV 2023

BMF – Nov 2019 – L1 – SA – Q15 – Basics of Business Finance and Financial Markets

Identifying a management accounting function among finance functions

Question

Which aspect of these finance functions is generally regarded as a management accounting function?
A. Ratio analysis
B. Budget preparation
C. Managing financial derivatives
D. Maintaining a good system of accounts
E. Setting of financial objectives and targets

Answer

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Tags: Finance Functions, Management Accounting
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2019

MA – May 2018 – L2 – Q2c – Other aspects of performance measurement

Explain two limitations of management information in providing guidance for managerial decision-making.

Question

Explain TWO limitations of management information in providing guidance for
managerial decision-making.

Answer

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Tags: Decision Making, Information Limitations, Management Accounting, Management Information
Level: Level 2

Topic: Other Aspects of Performance Measurement
Series: MAY 2018

MA – May 2017 – L2 – Q1b – Other aspects of performance measurement

Explain three qualities of management accounting information in terms of their importance for decision making.

Question

While managers can use different leadership styles, they all share the task of utilizing information to make decisions that achieve organizational goals. Accounting information for decision making will differ in terms of its details depending on the user.

Required:

Explain THREE qualities of Management Accounting information. (3 marks)

Answer:

The qualities of Management Accounting information include:

Relevance:
Information should be timely and bear on the decision-making process by possessing predictive or confirmatory (feedback) value.
Faithful Representation:
Information must be truthful, complete, neutral, and free from error.
Comparability:
Even though different companies may use different accounting methods, there is still sufficient basis for valid comparison.

Additional points from the original answer but not required since only three qualities were asked:

Consistency:
Deviations in measured outcomes from period to period should be the result of deviations in underlying performance (not accounting quirks).
Verifiability:
Different knowledgeable and independent observers reach similar conclusions.
Timeliness:
Information should be available in sufficient time to be capable of influencing decisions.
Understandability:
Information should be clear and concise to those with reasonable business knowledge.

Answer

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Tags: Decision Making, Information Quality, Information relevance, Information reliability, Management Accounting
Level: Level 2

Topic: Other Aspects of Performance Measurement
Series: MAY 2017

MA – Nov 2016 – L2 – Q1a – Introduction to management accounting

Discuss the importance of Management Accounting in a modern business environment and compare it with Financial Accounting.

Question

The Management Accountant plays an important role in the modern business environment, and his/her activities may be categorized as providing information under the key headings of planning, control, and decision making.

You have just been appointed to a new role as Management Accountant in Akwaba Ltd, a large engineering company producing a wide range of parts for the automobile industry. This new role has been created following a majority decision of the Board of Directors based on the advice of the company’s auditors. However, the Managing Director comes from a marketing background and does not understand why the company needs another accountant as there is already a Financial Accountant employed on a full-time basis. She voted against the creation of the new position and considers the cost of your remuneration to be an unwelcome burden which will only serve to reduce the company’s reported profits. According to her, the equation Y = a – bx which management accountants always use is not relevant in the modern-day business environment.

You are aware of the strong opinion of the Managing Director, and as your first task, you decide to attempt to convince her of the importance of Management Accounting in the modern business environment and also suggest some ways that you can ensure your future role in Akwaba Ltd is financially viable.

Required:

Prepare a Memorandum to the Managing Director in which you address her concerns using the following guidelines:

i) Distinguish clearly between Financial Accounting and Management Accounting under any FOUR different headings. (6 marks)

ii) For each of the THREE key headings of planning, control, and decision making, outline one Management Accounting technique and how it would lead to stronger commercial success for the company. (6 marks)

iii) Identify any THREE qualitative (non-financial) issues that you should consider as a Management Accountant when providing information for decision making in Akwaba Ltd. (2 marks)

Answer

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Tags: Control, Decision Making, Financial Accounting, Management Accounting, Planning, Qualitative Issues
Level: Level 2

Topic: Introduction to management accounting
Series: NOV 2016

FA – Dec 2023 – L1 – Q1 – Bad and doubtful debt | Double entry bookkeeping | The IASB’s Conceptual Framework

Explains the purpose and differences between Financial and Management Accounting, prepares ledger accounts, and links prudence concept to allowance for receivables.

Question

a) Financial Accounting and Management Accounting are similar with regard to the determination of costs, their assignment to different accounting periods, and allocation of costs to different departments and segments. This implies that the concepts and principles that are used in Financial Accounting may be suitable for Management Accounting.

Required:
i) Explain the purpose and scope of financial accounting. (4 marks)
ii) Explain THREE (3) differences between Financial Accounting and Management Accounting. (6 marks)

b) On 1 January 2021, Mankessim Traders had the following entries in its ledger accounts:

Insurance: GHȼ600 owing
Commission receivable: GHȼ500 owing to Mankessim Traders
Allowance for receivables: GHȼ1,600 credit balance

The following information is available for the financial year ended 31 December 2021:

Insurance was paid as follows:
- 26 February 2021 GHȼ2,000
- 15 October 2021 GHȼ2,600
- The payment on 15 October 2021 relates to the period 1 October 2021 to 31 March 2022.
Commission receivable was as follows:
- 10 January 2021 GHȼ400
- 18 January 2021 GHȼ200
- 13 November 2021 GHȼ3,000
On 31 December 2021, GHȼ600 was owing in commission to Mankessim Traders.
The trade receivables balance at 31 December 2021 was GHȼ38,400. The allowance for receivables is to be provided as GHȼ600 for a specific debt, plus 2% on the remainder of receivables.

Required:
Prepare the following ledger accounts, including in each case the transfer to the Statement of Profit and Loss, for the year ended 31 December 2021, and the balance carried down to the next financial year.
i) Insurance. (2 marks)
ii) Commission receivable. (2 marks)
iii) Allowance for receivables. (2 marks)

c) Explain why maintaining an allowance for receivables is an application of the prudence concept. (4 marks)

Answer

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Tags: Financial Accounting, Ledger Accounts, Management Accounting, Prudence Concept
Level: Level 1

Topic: Bad and doubtful debt, Double entry bookkeeping, The IASB’s Conceptual Framework
Series: DEC 2023

IMAC – NOV 2023 – L1 – Q3 – Scope of Management Accounting

Discuss changes in the business environment affecting management accounting, differences between financial and management accounting, and the benefits of a cost and management accounting system.

Question

a) Management accounting can be described as the process of supplying the managers and employees in an organization with relevant information, both financial and non-financial, for making decisions, allocating resources, monitoring, evaluating, and rewarding performance.

Required:
In relation to the description of management accounting provided above:
State THREE (3) important changes that have taken place in the business environment that have influenced management accounting practice. (3 marks)

b) Financial Accounting and Management Accounting share important similarities since both are based on financial information and other quantitative information about business operations.

Required:
Identify FOUR (4) differences between financial accounting and management accounting. (4 marks)

c) Mr. Osei Nyarko, an engineer by training, established Kotmat Ltd three years ago with five employees. His only source of information concerning the performance of Kotmat Ltd has been the half-yearly financial statements, which he receives ten weeks after the end of each half-year. A proposal has been submitted to Mr. Osei Nyarko to install a cost and management accounting system.

Required:
i) Identify FOUR (4) benefits Mr. Nyarko will derive from installing a cost and management accounting system. (4 marks)
ii) Enumerate FOUR (4) types of information which could be obtained from the cost and management accounting system that cannot be obtained from the current system. (4 marks)

**d) State and explain TWO (2) useful pieces of information generated by marginal and absorption costing systems. (5 marks)

Answer

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Tags: Business Environment, Cost and Management Accounting System, Financial Accounting, Management Accounting
Level: Level 1

Topic: Scope of Management Accounting
Series: NOV 2023

IMAC – Aug 2022 – L1 – Q3 – Scope of Management Accounting

Discuss the objectives and qualities of management accounting, differentiate operational control from cost control, and explain specific order costing characteristics.

Question

a) Management Accounting is that branch of accounting known for management decision-making. It is a more intimate merger of the two older professions of management and accounting, wherein the information needs of the manager determine the accounting means for their satisfaction.

In Management Accounting, managers use accounting information in decision-making and to assist in the management and performance of their control functions. Management accounting information should comply with certain qualities and characteristics to be useful in planning, control, and decision-making.

Required:
i) Identify THREE (3) objectives of Management Accounting. (6 marks)
ii) Explain FIVE (5) qualities of management accounting information. (5 marks)

b) All deployed cost-accounting controls and processes should bring to focus opportunities for improvement and engender decision-makers’ trust in results. Operational control and cost control management approaches are needed to add insight into where and how cost improvements can be implemented.

Required:
Distinguish between operational control and cost control. (4 marks)

c) Specific order costing methods are appropriate for business organizations that are involved in the construction, manufacturing, or assembling of products to individual customers’ specifications.

Required:
State THREE (3) characteristics of Specific Order Costing. (5 marks)

Answer

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Tags: Cost Control, Information Qualities, Management Accounting, Objectives, Operational Control, Specific Order Costing
Level: Level 1

Topic: Scope of Management Accounting
Series: AUG 2022

IMAC – NOV 2020 – L1 – Q3 – Cost and Cost Behaviour

Explain various cost terms in management accounting; identify characteristics of services.

Question

a) Cost is a generic term used by accountants to mean the expenses that are incurred in the production of goods and the delivery of services. The nature of cost is, however, well understood by a preceding adjective.

Required:
Explain the difference between the following cost terms as used in Management Accounting:
i) Direct and Indirect cost. (3 marks)
ii) Fixed and Variable cost. (3 marks)
iii) Controllable and Uncontrollable cost. (3 marks)
iv) Full and Marginal cost. (3 marks)
v) Production and Non-Production cost. (3 marks)

b) Costs can be established for services and operations in the same way as for physical goods even though services are different from physical goods.

Required:
Identify and explain TWO (2) characteristics of services. (5 marks)

Answer

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Tags: Cost Classification, Management Accounting, Service Characteristics
Level: Level 1

Topic: Cost and Cost Behaviour
Series: NOV 2020

Question Tag: Management Accounting

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ICMA – Nov 2024 – L1 – Q3b – Relevant Cost Concepts

Explains two key concepts of relevant cost used in decision-making.

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PM – May 2019 – L2 – Q6 – Strategic Management Accounting

Discusses the essential qualities needed for management accounting information to be useful for decision-making.

You're reporting an error for "PM – May 2019 – L2 – Q6 – Strategic Management Accounting"

FA – Nov 2013 – L1 – SA – Q33 – Roles of Accountants in Business and the Economy

Understanding the branch of accounting that provides information to management.

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MI – May 2018 – L1 – SA – Q1 – Introduction to Cost Accounting

Identifying non-functions of cost accountants in an organization.

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MI – Nov 2014 – L1 – SA – Q10 – Introduction to Cost Accounting

Identify which report is NOT the responsibility of a Management Accountant.

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BMF – Nov 2023 – L1 – SA – Q13 – Business and Organizational Structures and Choices

Identify which field is concerned with internal reporting to decision-makers.

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FA – Nov 2023 – L1 – SB – Q1B – Roles of Accountants in Business and the Economy

Describe various types of accounting and their roles.

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BMF – Nov 2019 – L1 – SA – Q15 – Basics of Business Finance and Financial Markets

Identifying a management accounting function among finance functions

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MA – May 2018 – L2 – Q2c – Other aspects of performance measurement

Explain two limitations of management information in providing guidance for managerial decision-making.

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MA – May 2017 – L2 – Q1b – Other aspects of performance measurement

Explain three qualities of management accounting information in terms of their importance for decision making.

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MA – Nov 2016 – L2 – Q1a – Introduction to management accounting

Discuss the importance of Management Accounting in a modern business environment and compare it with Financial Accounting.

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FA – Dec 2023 – L1 – Q1 – Bad and doubtful debt | Double entry bookkeeping | The IASB’s Conceptual Framework

Explains the purpose and differences between Financial and Management Accounting, prepares ledger accounts, and links prudence concept to allowance for receivables.

You're reporting an error for "FA – Dec 2023 – L1 – Q1 – Bad and doubtful debt | Double entry bookkeeping | The IASB’s Conceptual Framework"

IMAC – NOV 2023 – L1 – Q3 – Scope of Management Accounting

Discuss changes in the business environment affecting management accounting, differences between financial and management accounting, and the benefits of a cost and management accounting system.

You're reporting an error for "IMAC – NOV 2023 – L1 – Q3 – Scope of Management Accounting"

IMAC – Aug 2022 – L1 – Q3 – Scope of Management Accounting

Discuss the objectives and qualities of management accounting, differentiate operational control from cost control, and explain specific order costing characteristics.

You're reporting an error for "IMAC – Aug 2022 – L1 – Q3 – Scope of Management Accounting"

IMAC – NOV 2020 – L1 – Q3 – Cost and Cost Behaviour

Explain various cost terms in management accounting; identify characteristics of services.

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