UNIT ONE

INTRODUCTION TO COST AND MANAGEMENT ACCOUNTING

Definition and meaning of Accounting
What is accounting and why is it Important for Your Business?
Definition of ―accounting is how your business records, organizes, and understands its financial
information. You can think of accounting as a big machine that you put raw financial information
into—records of all your business transactions, taxes, projections, etc.—that then spits out an easy to
understand story about the financial state of your business.

Accounting tells you whether or not you’re making a profit, what your cash flow is, what the current
value of your company’s assets and liabilities is, and which parts of your business are actually
making money. Accounting is a business language. We can use this language to communicate
financial transactions and their results. As a result of economic, industrial, and technological
developments, different specialized fields in accounting have emerged. The famous branches or
types of accounting include: cost accounting, managerial accounting and financial accounting.

Meaning and Definition of Management Accounting

What is cost accounting?
Cost accounting is the 'gathering of cost information and its attachment to cost objects, the
establishment of budgets, standard costs and actual costs of operations, processes, activities or
products; and the analysis of variances, profitability or the social use of funds'. CIMA Official
Terminology.
Cost accounting is a management information system which analyses past, present and future data to
provide the basis for managerial action. Cost accounting deals with the calculation and assessment of
costs and expenses to purchase or produce something. It relates to calculation per unit cost using
different costing techniques. Its primary purpose is to facilitate managers in decision making.
The main activities of cost accounting are:
 Budgeting: In cost accounting, various budgets are prepared, showing cost, revenue, profit,
production capacity and efficiency of plant and machinery, as well as the efficiency of
workers. The budget is planned in a scientific and systematic way that is often unique to the
company, as reports are not bound to the International financial reporting standards (IFRS).
 Classify and break down costs for external reporting and internal profit measurement. Since
costs are calculated on a detailed level, identifying profitable and unprofitable items or
activities becomes easy.
 Information on costs and activities may be used as a basis to estimate future costs in
preparing and reviewing budget estimates.
 Determine the fees or prices for goods and services: in tough market conditions or in slump
periods, costing helps to determine the selling price of the product at the optimum level to be
competitive.

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 Meaning and Definition of Management Accounting
Management accounting also is known as managerial accounting and can be defined as a process of
providing financial information and resources to the managers in decision making. Management
accounting is only used by the internal team of the organization. Also called managerial accounting,
management accounting helps the company collect financial and non-financial information and then
classify, order and present it in order to improve decision-making, control, planning and
management in general within the company. Management accounting relates to the provision of
appropriate information for decision-making, planning, cost control and performance evaluation.
Management accounting turns data into information, knowledge, and wisdom about a business
entity’s operations. This is one step further than cost accounting. Management accounting works to
know the reasons of profit or loss and studies the factors which influence efficiency to assist in
decision making. Therefore, cause and effect is an important feature of management accounting.
Objective of management accounting is to use this statistical data and take a better and accurate
decision, controlling the enterprise, business activities, and development.

Difference between Cost Accounting and Management Accounting

Learning objectives 1.2: Identify the major differences and similarities

between cost accounting, managerial accounting and financial accounting

What is cost and management accounting?

Cost accounting and management accounting are two important terms in accounting that are used to
control and formulate the organization policies. Both are used for different purposes with different
styles. Let’s look at the main differences. The two accounting system plays a significant role, as the
users are the internal management of the organization. While cost accounting has a quantitative
approach, i.e. it records data which is related to money, management accounting gives emphasis on
both quantitative and qualitative data.

BASIS OF COST ACCOUNTING MANAGEMENT ACCOUNTING

COMPARISON
Meaning The recording, classifying and The accounting in which the both
summarizing of cost data of an financial and non-financial information
organization is known as cost are provided to managers is known as
accounting. Management Accounting.
Information Type Quantitative. Quantitative and Qualitative.
Objective Ascertainment of cost of Providing information to managers to
production. set goals and forecast strategies.
Scope Concerned with ascertainment, Impart and effect aspect of costs.
allocation, distribution and
accounting aspects of cost.
Specific Procedure Yes No

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Recording Records past and present data It gives more stress on the analysis of
future projections.
Planning Short range planning Short range and long range planning
Interdependency Can be installed without Cannot be installed without cost
management accounting. accounting.

Meaning and Definition of Financial Accounting

Financial accounting is the area of accounting that focuses on providing external users with useful
information or an accountant reports on the financial position of a firm and the firm’s performance
by creating financial statements. In other words, financial accounting is a way of reporting business
activity and financial information to investors, creditors, and other people outside the business
organization.
Investors and creditors are often called external users because they are people outside of the
organization who use the company financial information to make decisions. The most common form
of financial information issued to external users by companies is a general purpose set of financial
statements.
Difference between Financial Accounting & Management Accounting
The financial accounting system captures the results of past transactions in financial terms, that is,
measured in dollars. The management accounting system goes beyond this. It often includes plans
for the future such as operating budgets and long-term strategic plans. These plans are built into the
accounting system to help the manager monitor the operations.
The management accounting system also includes non-financial information such as percentage
defects in operations, percentage on-time delivery, and results of customer surveys.

Financial accounting systems ensure that the assets and liabilities of a business are properly
accounted for, and provide information about profits or loss and so on for shareholders and for other
interested parties.
Management accounting systems provide information specifically for the use of managers within
an organization.

Management information provides a common source from which information is drawn for two
groups of people.
a. Financial accounts are prepared for individuals external to an organization: e.g. shareholders,
customers, suppliers, tax authorities, employees.
b. Management accounts are prepared for internal managers of an organization. e.g. Managers,
employees
The data used to prepare financial accounting and management accounting is the same. The
differences between the financial accounts and the management accounts arise because the data is
analyzed differently.

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 Financial Accounting Managerial Accounting
Primary users of Reports to those outside the Reports to those inside the organization
information organization owners, lenders, for planning, directing and motivating,
tax authorities and controlling and performance evaluation.
regulators.
Units of Emphasis is on summaries Emphasis is on decisions affecting the
measurement( time of financial consequences of future.
emphasis) past activities.
Verifiability versus Objectivity and verifiability Relevance of items relating to decision
Relevance of data are emphasized. making is emphasized.
Precision versus Precision of information is Timeliness of information is required.
timelines required.
Focal point for Only summarized data for Detailed segment reports about
analysis( contents of the entire organization is departments, products, customers, and
reports) prepared. employees are prepared.
Restrictive Must follow International Need not follow International financial
guidelines financial reporting standard reporting standard (IFRS).
(IFRS).
Rule or Mandatory for external Not mandatory.
principle reports.
Types of accounting Double entry system Not restricted to double entry system;
systems any useful system can be used
Frequency of Periodical on a regular basis Whenever needed; may not be on a
reporting regular basis
Purpose of the Communicate organization’s Help for special purpose for specific
Information financial and operating decisions to fulfill an organizations
information to investors, goal
banks, regulators and other
outside parties

Activity 1.1: Dear students, do you think there would be relationships between financial
accounting and management accounting
______________________________________________________________________
______________________________________________________________________

What is Management Accounting?

Management accounting is often defined as a process of identification, measurement, interpretation

and communication of information that is useful for managers to plan, control and evaluate their
actions within an organization.

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In simple terms, people within the management accounting department has a job of providing
managers and leaders of a company with the most accurate and useful information to make and
evaluate organizational decisions. The following are often mentioned as the strategic functions of
management accounting:
o Controlling present activities of the company
o Maximizing the use of corporate resources
o Planning for future actions and strategies
o Evaluating decisions and performances
o Improving communication, internal and externally
The development of management accounting is due to the use of additional techniques that changes
the concept from simple into sophisticated. The adoption of new and innovative techniques is
possible due to the subjective and liquid nature of management accounting concepts.
ROLE & FUNCTIONS OF COST AND MANAGEMENT ACCOUNTING

Learning objectives 1.4: Describe the role of cost and management accountants in an
organization

As you studied basic accounting procedures and the three main financial statements — the statement
financial position, income statement, and cash flow statement. These statements are prepared for and
provided to users external to the organization such as shareholders, bankers, and government.
Accounting focused on the external user is known as financial accounting. In this course, you will
study accounting information typically provided to users internal to the organization. Management
accounting serves the needs of users within the organization, such as managers.

The role of a cost and management accounting system is to:

o Provide relevant information to management for decision making.
o Assist management for planning, measurement, evaluation and controlling of business
activities.
o Help in allocation of cost to products and inventories for both external and internal users.
Though the term cost accounting and management accounting is used by various authors
synonymously but in actual, cost accounting is concerned with accumulation and allocation of costs
to different cost objects. Any deviation with the set standards are analyzed and reported. All these
mechanism is done to control costs.
The main function of cost and management accounting is provision of relevant information to the
management for decision making.

Who needs management accounting information?

The information required by Managers varies according to the natures of resources that they manage
this is because of the very different nature of the decisions that they make and their different areas of
responsibility

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 1. Senior managers - need information that oversees the entire organization
2. Middle managers - require more detailed information about their area of responsibility.
3. Operational managers - need information that help them manage day to day operations to
ensure target performance is met (deals directly with customers).

The Work of Management and the Need for Managerial Accounting Information
The purpose of management accounting in the organization is to support competitive decision
making by collecting, processing, and communicating information that helps management plan,
control, and evaluate business processes and company strategy. Every organization—large and
small—has managers. Someone must be responsible for formulating strategy, making plans,
organizing resources, directing personnel, and controlling operations. Managers at everywhere, carry
out three major activities— planning, directing and motivating, and controlling.
o Planning involves establishing a basic strategy, selecting a course of action, and specifying
how the action will be implemented. For example, deciding what products to make, and
where and when to make them. Determining the materials, labour, and other resources that
are needed to achieve desired output.
o Directing and motivating involves mobilizing people to carry out plans and run routine
operations.
o Controlling involves ensuring that the plan is actually carried out and is appropriately
modified as circumstances change. Management accounting information plays a vital role in
these basic management activities—but most particularly in the planning and control
functions.
The most important job of the management accountant is to conduct a relevant cost analysis to
determine the existing expenses and give suggestions for the future activities. Once the management
accounting team is done with relevant cost analysis, you can make better and evidence-based
decisions. Its primary purpose is to facilitate managers in decision making. The main activities of
cost accounting are: Budgeting: In cost accounting, various budgets are prepared, showing cost,
revenue profit, production capacity and efficiency of plant and machinery as well as the efficiency of
workers.

Activity 1.2: Why cost and management accounting is important?

____________________________________________________________________
____________________________________________________________________

Managerial Decision Making Process

Learning Objectives 1.5: Explain the five-step decision-making process

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 Small business owners and managers are faced with countless decisions every business day.
Management accounting uses information from your operations to produce reports that provide
ongoing insight into business performance, such as profit margin and labor utilization, so you and
your managers have data-driven input to make everyday decisions. Small businesses can leverage
this powerful trove of calculations to improve decision-making over time for higher profitability and
greater competitive advantage.
Decision making is crucial for running a business enterprise which faces a large number of problems
requiring decisions. Which product to be produced, what price to be charged, what quantity of the
product to be produced, what and how much advertisement expenditure to be made to promote the
sales, how much investment expenditure to be incurred are some of the problems which require
decisions to be made by managers.

The five steps involved in managerial decision making process are explained below:

1. Establishing the Objective: The first step in the decision making process is to establish the
objective of the business enterprise. The important objective of a private business enterprise is to
maximize profits. However, a business firm may have some other objectives such as
maximization of sales or growth of the firm. But the objective of a public enterprise is normally
not of maximization of profits but to follow benefit-cost criterion. According to this criterion, a
public enterprise should evaluate all social costs and benefits when making a decision whether to
build an airport, a power plant, a steel plant, etc.
2. Defining the Problem: The second step in decision making process is defining or identifying the
problem. Defining the nature of the problem is important because decision making is after all
meant for solution of the problem. For instance, a cotton textile firm may find that its profits are
declining. It needs to be investigated what are the causes of the problem of decreasing profits.
Whether it is the wrong pricing policy or bad labour-management relations or the use of outdated
technology, which is causing the problem of declining profits. Once the source or reason for falling
profits has been found, the problem has been identified and defined.
3. Identifying Possible Alternative Solutions (i.e. Alternative Courses of Action): Once the
problem has been identified, the next step is to find out alternative solutions to the problem. This
will require considering the variables that have an impact on the problem. In this way, relationship
among the variables and with the problems has to be established. In regard to this, various
hypotheses can be developed which will become alternative courses for the solution of the
problem. For example, in case of the problem mentioned above, if it is identified that the problem
of declining profits is due to be use of technologically inefficient and outdated machinery in
production.
The two possible solutions of the problem are:
o Updating and replacing only the old machinery.
o Building entirely a new plant equipped with latest machinery.

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 The choice between these alternative courses of action depends on which will bring about larger
increase in profits.
4. Evaluating Alternative Courses of Action: The next step in business decision making is to
evaluate the alternative courses of action. This requires the collection and analysis of the relevant
data. Some data will be available within the various departments of the firm itself, the other may
be obtained from the industry and government. The data and information so obtained can be used
to evaluate the outcome or results expected from each possible course of action. Methods such as
regression analysis, differential calculus, linear programming, Cost - benefit analysis are used to
arrive at the optimal course.
The optimum solution will be one that helps to achieve the established objective of the firm. The
course of action which is optimum will be actually chosen. It may be further noted that for the
choice of an optimal solution to the problem, a manager works under certain constraints. The
constraints may be legal such as laws regarding pollution and disposal of harmful wastes; they are
financial (i.e. limited financial resources); they may relate to the availability of physical
infrastructure and raw materials, and they may be technological in nature which set limits to the
possible output to be produced per unit of time.
The crucial role of a business manager is to determine optimal course of action and he has to
make a decision under these constraints.
5. Implementing the Decision: After the alternative courses of action have been evaluated and
optimal course of action selected, the final step is to implement the decision. The implementation of
the decision requires constant monitoring so that expected results from the optimal course of action
are obtained. Thus, if it is found that expected results are not forthcoming due to the wrong
implementation of the decision, then corrective measures should be taken.
However, it should be noted that once a course of action is implemented to achieve the established
objective, changes in it may become necessary from time to time in response in changes in
conditions or firm’s operating environment on the basis of which decisions were taken.

Activity 1.3: Test your understanding

Why Management Accounting Is Important in Decision-Making?
________________________________________________________________________
________________________________________________________________________

Key Management Accounting Guidelines

Learning Objectives 1.6: Describe three guidelines management accountants
follow in supporting managers

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Three guidelines help management accountants provide the most value to the strategic and
operational decision making of their companies:
i. Employ a cost–benefit approach,
ii. Give full recognition to behavioral and technical considerations, and
iii. Use different costs for different purposes.
i. Employ a cost–benefit approach
A cost benefit approach is applied when the decision needs to be taken between different alternatives
based on the benefit they can earn and the cost they incur. This approach helps the management
accountants to analyze resource allocation decisions like make or buy, hire or buy etc. Management
accountants continually face resource allocation decisions. The cost-benefit approach should be used
in making these decisions. Resources should be spent if the expected benefits to the company exceed
the expected costs. The expected benefits and costs may not be easy to quantify, but it is a useful
approach for making resource allocation decisions. Companies now use budgeting system that
compels managers to plan ahead, compare actual to budgeted information, learn, and take corrective
action.
ii. Give full recognition to behavioral and technical considerations
Give full recognition to behavioral as well as technical considerations. A management accounting
system should have two simultaneous considerations for providing information:
o Technical considerations enable managers to make economic decisions by providing
relevant information, both financial and non-financial in suitable formats, to make an
analysis of the economic benefits of project to be evaluated.
o Behavioral considerations enable managers to provide detailed information to their
associates and guide them in improving their performance. Also, it helps in analyzing the
behavioral benefits it provides to the human resource of the company like motivation to align
the individual goals with the organizations goals.
Management is primarily a human activity; the emphasis needs to be on how to help individuals do
their jobs better.

iii. Use different costs for different purposes.

Management accountants are expected to consider using alternative approaches to computing costs
in different situations. The reason being that interpretation of cost concepts differs based on the end-
purpose of use. For evaluating different projects, mainly the relevant costs like variable and traceable
fixed costs are considered. Common fixed costs are usually sunk costs and irrelevant for decision
making process. To illustrate this guideline, consider how to account for advertising. For the purpose
of preparing financial statements under IFRS, advertising is an expense in the accounting period
when it is incurred. For the purpose of determining a product’s selling price, its advertising costs,
along with its other costs from all business functions of the value chain, should be taken into
account.
Activity 1.4
What three guidelines help management accountants provide the most value to
managers? 9
____________________________________________________________________
 1.1 Management Accounting in service organizations
Learning Objectives 1.7: Discuss how management accounting works in service
organizations

The concept of Management accounting is applied to the service industry accounting practice to
identify variable costs, fixed costs and job order costing for setting service price. Managerial
accounting helps to ascertain costs to a specific department or product.
Service companies, such as transportation, business, professional, restaurants and maintenance
services, use managerial accounting to calculate certain business functions costs. These companies
determine how much labor is used and the amount of materials used. Managerial accounting helps
decide the amount of time spent on each customer to maximize profit. These companies also use
break-even analysis and forecasting to create plans for generating revenue and planning sales
goals.

Listed below are the primary tasks/services performed by management accountants. The degrees of
complexity relative to these activities are dependent on the experience level and abilities of any one
individual.
 Managerial consultancy  Geographic vs. industry or client
 Financial report analysis segment reporting
 Cost analysis Rate and volume  Sales management scorecards
analysis  Cost-benefit analysis
 Business metrics development  Cost-volume-profit analysis
 Price modeling  Life cycle cost analysis
 Product profitability
In today’s world, Management accounting is an integral part of accounting for the manufacturing
industry as well as service industry. Managerial accounting helps to ascertain costs to a specific
department or product. It is necessary for analyzing and predicting costs for maximizing
organizational goal. It is used for controlling excess costs of services. The variable costs of service
industry vary on the level of service provided to customers. If the level of activities of a service
company increases, the variable costs will also increase. In Management accounting, variable costs
are measured to identify contribution margin which provides marginal profit per unit of service
provided and it can be used to calculate the operating leverage of a service company.

Fixed costs including rent, insurance, premises don’t change with the level of service provided. It is
fixed up to the relevant range. If a service company increases its services, fixed cost will remain the
same. In Management accounting, fixed costs are used to determine breakeven point and targeted
income. Mixed cost of the service industry is the combination of variable and fixed costs. It can be

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count as variable or fixed or both. For example, electricity can be the mixed cost. Different
allocation based is used to allocate fixed costs.

Institute of Management Accountants Statement of Ethical Professional Practice

Statement on Management Accounting

Learning Objectives 1.8: Explain the importance of upholding ethical standards

Members of Institute of Management Accountants (IMA) shall behave ethically. A commitment to

ethical professional practice includes overarching principles that express our values and standards
that guide member conduct.

Principles

Institute of Management Accountants (IMA’s) overarching ethical principles include: Honesty,

Fairness, Objectivity, and Responsibility.
Members shall act in accordance with these principles and shall encourage others within their
organizations to adhere to them.

Standards

Four standards of ethical conduct in management accountants' professional activities were developed
by the Institute of Management Accountants. The four standards are competence, confidentiality,
integrity, and credibility. IMA members have a responsibility to comply with and uphold the
standards of Competence, Confidentiality, Integrity, and Credibility. Failure to comply may result in
disciplinary action.

The specific standards requirements include:

1. COMPETENCE

o Maintain an appropriate level of professional leadership and expertise by enhancing

knowledge and skills.
o Perform professional duties in accordance with relevant laws, regulations, and
technical standards.
o Provide decision support information and recommendations that are accurate, clear,
concise, and timely. Recognize and help manage risk.

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 2. CONFIDENTIALITY

o Keep information confidential except when disclosure is authorized or legally

required.
o Inform all relevant parties regarding appropriate use of confidential information.
 Monitor to ensure compliance.
o Refrain from using confidential information for unethical or illegal advantage.

3. INTEGRITY
o Mitigate actual conflicts of interest. Regularly communicate with business associates
to avoid apparent conflicts of interest. Advise all parties of any potential conflicts of
interest.
o Refrain from engaging in any conduct that would prejudice carrying out duties
ethically.
o Abstain from engaging in or supporting any activity that might discredit the profession.
o Contribute to a positive ethical culture and place integrity of the profession above
personal interests.

4. CREDIBILITY

o Communicate information fairly and objectively.

o Provide all relevant information that could reasonably be expected to influence an
intended user’s understanding of the reports, analyses, or recommendations.
o Report any delays or deficiencies in information, timeliness, processing, or
internal controls in conformance with organization policy and/or applicable law.
o Communicate professional limitations or other constraints that would preclude
responsible judgment or successful performance of an activity.

Resolving Ethical Issues

In applying the Standards of Ethical Professional Practice, the member may encounter unethical
issues or behavior. In these situations, the member should not ignore them, but rather should actively
seek resolution of the issue. In determining which steps to follow, the member should consider all
risks involved and whether protections exist against retaliation.

When faced with unethical issues, the member should follow the established policies of his or her
organization, including use of an anonymous reporting system if available.

If the organization does not have established policies, the member should consider the following
courses of action:

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 o The resolution process could include a discussion with the member’s immediate supervisor.
If the supervisor appears to be involved, the issue could be presented to the next level of
management.
o IMA offers an anonymous helpline that the member may call to request how key elements of
the IMA Statement of Ethical Professional Practice could be applied to the ethical issue.
o The member should consider consulting his or her own attorney to learn of any legal
obligations, rights, and risks concerning the issue.

If resolution efforts are not successful, the member may wish to consider disassociating from the
organization.

Activity 1:5 Test Your Understanding – Exercises for you to complete to ensure that you have
understood the topics just learned.

1. What is managerial accounting?

2. What are functions of managerial accounting?
3. What are the major differences and similarities between financial and managerial accounting.
4. What is the role of management accountants in an organization
5. What are the ethical responsibilities of management accountants?

Unit summary

Cost accounting is a branch of accounting and has been developed due to limitations of financial
accounting. The financial accounting is primarily concerned with record keeping directed towards
the preparation of gross profit account, profit and loss account and statement of financial position. It
provides information regarding the gross profit, profit and loss that the business or enterprise is
making and also its financial position on a particular period. The information concerning the
business or enterprise is helpful to the management to control on business. The management of every
business enterprise is interested to know much more than the usual information supplied to outsiders.
In order to carry out its functions of planning, decision-making and control, it requires additional
cost data.

In the 1980s, the doubts had been raised of competitive environment that must make us to check
thoroughly our traditional cost accounting and management control system. The most important cost
accounting text books had been developed by 1925 is explained most the entire practices employed
by firm today. The purpose of management accounting in the organization is to support competitive
decision making by collecting, processing, and communicating information that helps management
plan, control, and evaluate business processes and company strategy.

Managers use a five-step decision-making process to implement strategy: (1) identify the problem
and uncertainties; (2) obtain information; (3) make predictions about the future; (4) make decisions
by choosing among alternatives; and (5) implement the decision, evaluate performance, and learn.
The first four steps are the planning decisions, which include deciding on organization goals,

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predicting results under various alternative ways of achieving those goals, and deciding how to attain
the desired goals. Step 5 is the control decision, which includes taking actions to implement the
planning decisions and deciding on performance evaluation and feedback that will help future
decision making. Three guidelines that help management accountants increase their value to
managers are (a) employ a cost-benefit approach, (b) recognize behavioral as well as technical
considerations, and (c) identify different costs for different purposes. The concept of Management
accounting is applied to the service industry accounting practice to identify variable costs, fixed
costs, fixed costs and job order costing for setting service price. Managerial accounting helps to
ascertain costs to a specific department or product. Management accountants have ethical
responsibilities that relate to competence, confidentiality, integrity, and credibility.

Self-Assessment Questions

Part I: Write “True” if the statement is correct and “False” if it is incorrect

1. An activity that provides financial and nonfinancial information to managers and other
internal decision makers of an organization is called managerial accounting.
2. Planning is the process of monitoring planning decisions and evaluating an organization's
activities and employees.
3. The purpose of using information provided by the accounting system is quite different for
investors and creditors than it is for managers of the firm.
4. The emphasis of the focus of information generated through managerial accounting is on
segments of the organization rather than the organization as a whole.
5. The accounting system will provide managers with accurate and precise information for
planning and decision making much faster than the information is provided to external users.

Part II: Choose the best answer from the Given alternatives

1. Which of the following is not true?

A. managerial accounting information is prepared for internal users

B. managerial accounting information is not required by various laws
C. there are specific standards of acceptability for managerial accounting
D. the structure of managerial accounting practice is relatively flexible

2. Management accounting is the branch of accounting concerned with reporting to

A. Internal managers C. The government

B. Shareholders D. Bankers
3. Which of the following costing activities is associated with the financial accounting system?
A. determining the cost of a department
B. determining the cost of goods sold for financial statements
C. preparing budgets

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 D. determining the cost of a customer

4. Which of the following is the correct sequence in which cost management information is
developed and used?

A. Business events, data, information, analysis, decisions

B. Business events, data, analysis, information, decisions
C. Business events, information, analysis, knowledge, decisions
D. Business events, data, information, knowledge, decisions

5. Management accounting and financial accounting differ in that management accounting

information is prepared
A. Following prescribed rules.
B. Using whatever methods the company finds beneficial.
C. For shareholders.
D. To summarize the whole company with little detail

6. An accounting approach, in which the expected benefits exceed the expected costs is
classified as:

A. benefit approach C. cost benefit approach

B. cost approach D. accounting approach
7. To determine whether a particular action is professionally ethical or not, using the Institute of
Management Accountants Statement of Ethical Professional Practice, it is necessary to know:

A. Whether the act is legal in your jurisdiction.

B. The intent and the business context of the act.
C. The amount of the fraud or theft that is involved.
D. Whether the management accountant is certified.

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