FACULTY OF COMMERCE

2024 - 25

SEMESTER 5

SUBJECT: Management Accounting -1

UNIT NO. 1 Introduction to Management

Accounting

COMPILED BY
Dr. Bhavna Parwani Prof. Meghavi Thaker

STUDY MATERIAL FOR REFERENCE

UNIT-1: MANAGEMENT ACCOUNTING

Topics covered
1.1 Introduction
1.2 Definitions of Management Accounting
1.3 Nature of Management Accounting
1.4 Functions of Management Accounting
1.5 Scope of Management Accounting
1.6 The Management Accountant
1.7 Management Accounting and Financial Accounting
1.8
Cost Accounting and Management Accounting
1.9 Limitations of Management Accounting

SECTION A :THEORY

1.1 INTRODUCTION
Management accounting can be viewed as Management-oriented Accounting.
Basically it is the study of managerial aspect of financial accounting,
"accounting in relation to management function". The primary task of
management accounting is to redesign the entire accounting system so that it
may serve the operational needs of the firm. It furnishes definite accounting
information, past, present or future, which may be used as a basis for
management action. The financial data are so devised and systematically
developed that they become a unique tool for management decision.

1.2 DEFINITIONS OF MANAGEMENT ACCOUNTING

The term “Management Accounting”, covers all those services by which the
accounting department can assist the top management and other departments

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in the formation of policy, control of execution and appreciation of
effectiveness.

This definition points out that management is entrusted with the primary task
of planning, execution and control of the operating activities of an enterprise.

It constantly needs accounting information on which to base its decision. A

decision based on data is usually correct and the risk of errors is minimized.

The Report of the Anglo-American Council of Productivity (1950) has also given
a definition of management accounting, which has been widely accepted.
According to it, "Management accounting is the presentation of accounting
information in such a way as to assist the management in creation of policy
and the day to day operation of an undertaking".

An analysis of the above definition shows that management needs information

for better decision-making and effectiveness. The collection and presentation
of such information come within the area of management accounting.

Thus, accounting information should be recorded and presented in the form of

reports at such frequent intervals, as the management may want. These
reports present a systematic review of past events as well as an analytical
survey of current economic trends.

Such reports are mainly suggestive in approach and the data contained in them
are quite up to date. The accounting data so supplied thus provide the
informational basis of action.

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The usual approach is that, first of all, a thorough analysis of the whole
managerial process is made, then the information required for each area is
explored, and finally, all the information, after analysis in terms of alternatives,
is taken into consideration before arriving at a management decision.

It is to be understood here that the accounting information has no end in itself;

it is a means to an end. As its basic idea is to serve the management, its form
and frequency are all decided by managerial needs. Therefore, accounting aids
the management by providing quantitative information on the economic well
being of the enterprise.

1.3 NATURE OF MANAGEMENT ACCOUNTING

The term management accounting is composed of 'management' and
'accounting'.

The word 'management' here does not signify only the top management but
the entire personnel charged with the authority and responsibility of operating
an enterprise.

Management accounting provides the management with the tools for an

analysis of the possible alternatives in terms of costs, prices and profits, etc.

But it should be understood that the accounting information supplied to

management is not the sole basis for managerial decisions. For reaching a final
decision, management has to apply its common sense, foresight, knowledge

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and experience of operating an enterprise, in addition to the information that
is already has.
The word 'accounting' used in this phrase should not lead us to believe that it
is restricted to a mere record of business transactions i.e., book keeping only. It
has indeed a 'macro-economic approach'. As it draws its raw material from
several other disciplines like costing, statistics, mathematics, financial
accounting, etc., it can be called an interdisciplinary subject, the scope of
which is not clearly demarcated.

Management accounting has no set principles such as the double entry system
of bookkeeping. In place of generally accepted accounting principles, the
philosophy of cost benefit analysis is the core guide of this discipline.

1.4 FUNCTIONS OF MANAGEMENT ACCOUNTING

The basic function of management accounting is to assist the management in

performing its functions effectively. The functions of the management are
planning, organizing, directing and controlling. Management accounting helps
in the performance of each of these functions in the following ways:

(i) Provides data: Management accounting serves as a vital source of data for
management planning. The accounts and documents are a repository of a vast
quantity of data about the past progress of the enterprise, which are a must
for making forecasts for the future.

(ii) Modifies data: The accounting data required for managerial decisions is
properly compiled and classified. For example, purchase figures for different

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months may be classified to know total purchases made during each period
product-wise, supplier-wise and territory-wise.

(iii) Analyses and interprets data: The accounting data is analyzed meaningfully
for effective planning and decision-making. For this purpose the data is
presented in a comparative form. Ratios are calculated and likely trends are
projected.

(iv) Serves as a means of communicating: Management accounting provides a

means of communicating management plans upward, downward and outward
through the organization. Initially, it means identifying the feasibility and
consistency of the various segments of the plan. At later stages it keeps all
parties informed about the plans that have been agreed upon and their roles in
these plans.

(v) Facilitates control: Management accounting helps in translating given

objectives and strategy into specified goals for attainment by a specified time
and secures effective accomplishment of these goals in an efficient manner. All
this is made possible through budgetary control and standard costing which is
an integral part of management accounting.

(vi) Uses also qualitative information: Management accounting does not

restrict itself to financial data for helping the management in decision making
but also uses such information which may not be capable of being measured in
monetary terms. Such information may be collected form special surveys,
statistical compilations, engineering records, etc.

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1.5 SCOPE OF MANAGEMENT ACCOUNTING
Management accounting is concerned with presentation of accounting
information in the most useful way for the management. Its scope is,
therefore, quite vast and includes within its fold almost all aspects of business
operations. However, the following areas can rightly be identified as falling
within the ambit of management accounting:

(i) Financial Accounting: Management accounting is mainly concerned with the

rearrangement of the information provided by financial accounting. Hence,
management cannot obtain full control and coordination of operations without
a properly designed financial accounting system.

(ii) Cost Accounting: Standard costing, marginal costing, opportunity cost

analysis, differential costing and other cost techniques play a useful role in
operation and control of the business undertaking.

(iii) Revaluation Accounting: This is concerned with ensuring that capital is

maintained intact in real terms and profit is calculated with this fact in mind.

(iv) Budgetary Control: This includes framing of budgets, comparison of actual

performance with the budgeted performance, computation of variances,
finding of their causes, etc.

(v) Inventory Control: It includes control over inventory from the time it is
acquired till its final disposal.

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(vi) Statistical Methods: Graphs, charts, pictorial presentation, index numbers
and other statistical methods make the information more impressive and
intelligible.

(vii) Interim Reporting: This includes preparation of monthly, quarterly, half-

yearly income statements and the related reports, cash flow and funds flow
statements, scrap reports, etc.

(viii) Taxation: This includes computation of income in accordance with the tax
laws, filing of returns and making tax payments.

(ix) Office Services: This includes maintenance of proper data processing and
other office management services, reporting on best use of mechanical and
electronic devices.

(x) Internal Audit: Development of a suitable internal audit system for internal
control.

1.6 THE MANAGEMENT ACCOUNTANT

Management Accounting provides significant economic and financial data to

the management and the Management Accountant is the channel through
which this information efficiently and effectively flows to the management.

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The Management Accountant has a very significant role to perform in the
installation, development and functioning of an efficient and effective
management information system.

He designs the framework of the financial and cost control reports that provide
each management level with the most useful data at the most appropriate
time.

He educates executives in the need for control information and ways of using
it. This is because his position is unique with respect to information about the
organization.

Apart from top management no one in the organization perhaps knows more
about the various functions of the organization than him. He is, therefore,
sometimes described as the Chief Intelligence Officer of the top management.

He gathers information, breaks it down, sifts it out and organizes it into

meaningful categories. He separates relevant and irrelevant information and
then ranks relevant information in an intelligible form to the management and
sometimes also to those who are interested in the information outside the
company.

He also compares the actual performance with the planned one and reports
and interprets the results of operations to all levels of management and to the
owners of the business.

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FUNCTIONS OF MANAGEMENT ACCOUNTANT
It is the duty of the management accountant to keep all levels of management
informed of their real position. He has, therefore, varied functions to perform.
His important functions can be summarized as follows:

(i) Planning: He has to establish, coordinate and administer as an integral part

of management, an adequate plan for the control of the operations. Such a
plan would include profit planning, programmes of capital investment and
financing, sales forecasts, expenses budgets and cost standards.

(ii) Controlling: He has to compare actual performance with operating plans

and standards and to report and interpret the results of operations to all levels
of management and the owners of the business. This is done through the
compilation of appropriate accounting and statistical records and reports.

(iii) Coordinating: He consults all segments of management responsible for

policy or action. Such consultation might concern any phase of the operation
of the business having to do with attainment of objectives and the
effectiveness of the organizational structures and policies.

(iv) Other functions:

He administers tax policies and procedures.
He supervises and coordinates the preparation of reports to governmental
agencies.
He ensures fiscal protection for the assets of the business through adequate
internal control and proper insurance coverage.

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He carries out continuous appraisal economic and social forces and the
government influences, and interprets their effect on the business.

1.7 MANAGEMENT ACCOUNTING AND FINANCIAL ACCOUNTING

Financial accounting and management accounting are closely interrelated

since management accounting is to a large extent rearrangement of the data
provided by financial accounting. Moreover, all accounting is financial in the
sense that all accounting systems are in monetary terms and management is
responsible for the contents of the financial accounting statements. In spite of
such a close relationship between the two, there are certain fundamental
differences. These differences can be laid down as follows:
(i) Objectives:
Financial accounting supplies information in the form of profit and loss account
and balance sheet to external parties like shareholders, creditors, banks,
investors and Government. Information is supplied periodically and is usually
of such type in which management is not much interested.

Management Accounting provides accounting information for internal use of

the management.

Thus, financial accounting is primarily an external reporting process while

management accounting is primarily an internal reporting process.

(ii) Analyzing performance:

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Financial accounting portrays the position of business as a whole. The financial
statements like income statement and balance sheet report on overall
performance or statues of the business.

On the other hand, management accounting directs its attention to the various
divisions, departments of the business and reports about the profitability,
performance, etc., of each of them.

Financial accounting deals with the aggregates and, therefore, cannot reveal
what part of the management action is going wrong and why.

Management accounting provides detailed analytical data for these purposes.

(iii) Data used:

Financial accounting is concerned with the monetary record of past events. It is
a post-mortem analysis of past activity and, therefore, out the date for
management action.

Management accounting is accounting for future and, therefore, it supplies

data both for present and future duly analyzed in detail in the 'management
language' so that it becomes a base for management action.

(iv) Monetary measurement:

In financial accounting only such economic events find place, which can be
described in money.

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However, the management is equally interested in non-monetary economic
events, viz., technical innovations, personnel in the organization, changes in
the value of money, etc. These events affect management's decision and,
therefore, management accounting cannot afford to ignore them.

For example, change in the value of money may not find a place in financial
accounting on account of "going concern concept". But while affecting an
insurance policy on an asset or providing for replacement of an asset, the
management will have to take into account this factor.

(v) Periodicity of reporting:

The period of reporting is much longer in financial accounting as compared to

management accounting. The Income Statement and the Balance Sheet are
usually prepared yearly or in some cases half-yearly.

Management requires information at frequent intervals and, therefore,

financial accounting fails to cater to the needs of the management. In
management accounting there is more emphasis on furnishing information
quickly and at comparatively short intervals as per the requirements of the
management.

(vi) Precision:
There is less emphasis on precision in case of management accounting as
compared to financial accounting since the information is meant for internal
consumption.

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 (vii) Nature:
Financial accounting is more objective while management accounting is more
subjective. This is because management accounting is fundamentally based on
judgement rather than on measurement.

(viii) Legal compulsion:

Financial accounting has more or less become compulsory for every business
on account of the legal provisions of one or the other Act.
However, a business is free to install or not to install system of management
accounting.

The above points of difference between Financial Accounting and

Management Accounting prove that Management Accounting has flexible
approach as compared to rigid approach in the case of Financial Accounting. In
brief, financial accounting simply shows how the business has moved in the
past while management accounting shows how the business has to move in
the future.

1.8 COST ACCOUNTING AND MANAGEMENT ACCOUNTING

There are many differences between cost accounting vs management
accounting.

• The scope of cost accounting is much narrower. The scope of

management accounting is much broader and vaster. Since both of
these help make management effective decisions, management
accounting has many more tools than cost accounting.

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 • Cost accounting is the sub-set of management accounting. Management
accounting itself is a stand-alone subject on helping management in
strategizing well.
• Cost accounting is used for management, shareholders, and
stakeholders also. Management accounting, on the other hand, is just
for management.
• Statutory audit is mandatory for cost accounting in giant businesses
since there can be chances of huge discrepancies. But there’s no
requirement of the statutory audit of management accounting.
• Cost accounting is solely based on quantitative data points.
Management accounting, on the other hand, is based on both
qualitative and quantitative data points.
• Cost accounting has its own norms and its own rules and is not
dependent on management accounting. On the other hand, to create
effective reports, management accounting is dependent on both cost
accounting and financial accounting.

Cost Accounting vs Management Accounting (Comparison Table)

The below table summarizes the key differences between cost accounting vs
management accounting.

The basis for

Comparison – Cost
Accounting vs Cost Accounting Management Accounting
Management
Accounting

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 Cost accounting revolves around Management accounting helps
1. Meaning cost computation, cost control, management make effective
and cost reduction. decisions about the business.

Management accounting
Cost accounting prevents a
offers a big picture of how
2. Application business from incurring costs
management should
beyond budget.
strategize.

3. Scope The scope is much narrow. The scope is much broader.

4. Measuring grid Quantitative. Quantitative and qualitative.

Cost accounting is one of the

Management accounting itself
5. Sub-set many sub-sets of management
is pretty vast.
accounting.

Historic and predictive

6. Basis of decision Historic information is the basis
information is the basis of
making of decision making.
decision making.

Statutory audit of cost The audit of management

7. Statutory
accounting is a requirement in accounting has no statutory
requirement
big business houses. requirement.

Cost accounting isn’t dependent

Management accounting is
8. Dependence on management accounting to
dependent on both cost &
be successfully implemented.

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 financial accounting for
successful implementation.

Management, shareholders, and

9. Used for Only for management.
vendors.

1.9 LIMITATIONS OF MANAGEMENT ACCOUNTING

Management accounting, being comparatively a new discipline, suffers from
certain limitations, which limit its effectiveness. These limitations are as
follows:

1. Limitations of basic records: Management accounting derives its

information from financial accounting, cost accounting and other
records. The strength and weakness of the management accounting,
therefore, depends upon the strength and weakness of these basic
records. In other words, their limitations are also the limitations of
management accounting.

2. Persistent efforts. The conclusions drawn by the management

accountant are not executed automatically. He has to convince people at
all levels. In other words, he must be an efficient salesman in selling his
ideas.

3. Management accounting is only a tool: Management accounting cannot

replace the management. Management accountant is only an adviser to

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 the management. The decision regarding implementing his advice is to
be taken by the management. There is always a temptation to take an
easy course of arriving at decision by intuition rather than going by the
advice of the management accountant.

4. Wide scope: Management accounting has a very wide scope

incorporating many disciplines. It considers both monetary as well as
non-monetary factors. This all brings inexactness and subjectivity in the
conclusions obtained through it.

5. Top-heavy structure: The installation of management accounting system

requires heavy costs on account of an elaborate organization and
numerous rules and regulations. It can, therefore, be adopted only by
big concerns.

6. Opposition to change: Management accounting demands a break away

from traditional accounting practices. It calls for a rearrangement of the
personnel and their activities, which is generally not like by the people
involved.

7. Evolutionary stage: Management accounting is still in its initial stage. It

has, therefore, the same impediments as a new discipline will have, e.g.,
fluidity of concepts, raw techniques and imperfect analytical tools. This
all creates doubt about the very utility of management accounting.

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SECTION B : Multiple Choice Questions

1. Which of the following tools and techniques are not used by

management accountant?
[A] Standard costing [B] Budgetary control
[C] Operating costing [D] Marginal costing
2. The term management accounting was first coined in
[A] 1960 [B] 1950 [C] 1945 [D]1955
3. Management accounting is
(A) Subjective (B) Objective
[A] Only A [B] Only B [C] Both A and B [D] None of the above
4. The use of management accounting is
[A] Optional [B] Compulsory
[C] Legally obligatory [D]Compulsory to some and optional to others
5. The management accounting can be stated an extension of
A)Cost Accounting B) Financial Accounting C) Responsibility Accounting
[A] Both A and B [B] Both A and C
[C] Both B and C [D] A, B, C
6. Which of the following is true about management accounting?
A) Management accounting is associated with presentation of accounting
data.
B) Management accounting is extremely sensitive to investors needs.
[A] Only A [B] Only B
[C] Both A and B [D] None of the above
7. Management accounting assists the management
[A] Only in control [B] Only in direction
[C] Only in planning [D] In planning, direction and control

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 8. Which of the following are tools of management accounting?
A) Decision accounting B) Standard costing
C) Budgetary control D) Human Resources Accounting
[A] A, B and D [B] A, C and D [C] A, B and C [D] A, B , C, D
9. Management accounting is related with
a) The problem of choice making
b) Recording of transactions
c) Cause and effect relationships
[A] A and B [B] B and C [C] A and C [D] All are false
10.Management accountancy is a structure for
[A] Costing [B] Accounting [C] Decision making [D] Management
11. Who coined the concept of management accounting?
[A] R.N Anthony [B]James H. Bliss
[C] J. Batty [D]American Accounting Association
12.Which of the following statements are false about management
accounting?
A)Management accounting is concerned with historical events.
B) Management accounting is related only with such instances which can
be expressed in monetary terms.
C) Management accounting is a part of Financial Management
D) Management accounting information can be disclosed to outsiders.
[A] A, B & D
[B] A, C & D
[C] A,B & C
[D] A, B,C,D

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 13.Management accounting deals with
[A] Quantitative information [B]Qualitative information
[C] Both a and b [D]None of the above
14.Management accounting highlights staff relationship with top
management as well as other personnel.
[A] True [B]False [C]can’t say
15.The definition ‘Management Accounting is the presentation of
accounting information in such a way as to assist management in the
creation of policy and the day-to-day operation of an undertaking.’
[A] Ango-American Council on Productivity
[B] AICPA
[C] Robert N. Anthony
[D] All of the above
16.Which of the following is not a limitation of financial accounting?
[A] Presents only past data
[B]Useless for controlling
[C] Presents dead figures, not interpretation
[D]Useful for taking decisions
17.Which of the following is not characteristics of Management Accounting?
[A] It is based on accounting information
[B] It is not concerned with analysis of all accounting information
which may be useful to the management
[C] It is concerned with presentation of accounting information at
regular intervals in the form of reports before the management
[D] It is concerned with preparation of budgets and budgetary control
18.Which of the following is not a scope of Management Accounting?

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 [A] Budgetary control system is an integral part of management
accounting
[B] To control business activities it is very much necessary to control
inventory
[C] The taxation is not more important in accounts than any other
matter.
[D] For self control of business internal audit is required.
19.Which of the following is not a function of management accounting?
[A] The budgets are not the bases, which are used to control the
business activities by the management
[B] The accounting data has to be classified and properly arranged for
presentation before the management
[C] The accounting data has to be presented before the management
in its proper perspective so that it becomes meaningful
[D] The management accountant is called upon to evaluate capital
projects.
20.Which of the following is true for management accounting?
[A] It is not very expensive
[B] Management accounting makes use of various techniques
[C] Management accounting is a tool for decision making
[D] Management accounting provides useful accounting data for
policy decisions
21.The objective of management accounting is-
[A] Only to assist in preparing financial accounts
[B] Only to assist in the costing functions like cost control, to decide
sales price etc

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 [C] To assist in preparing financial reports to present to the
shareholders
[D] To assist the managers by presenting the whole accounting data in
suitable form
22.Management accounting –
[A] Depends on financial accounting [B] Depends on cost accounting
[C] Depends on both [D] None
23.In management accounting, during assets valuation the assets are
considered at their
[A] Basic price [B] Price after depreciation
[C] Replacement value [D] Policy not decided
24.In management accounting internal audit is to be done-
[A] Compulsory once in a year
[B] Compulsory twice in a year
[C] Compulsory by the auditors nominated by government
[D] Voluntary
25.Which of the following reports is to be called special report?
[A] Report of daily consumption of raw materials
[B] Report of monthly wages of employees
[C] Report of replacement of machinery
[D] Report of regionwise sales
26.Which of the following is not a tool and technique of management
accounting?
[A] Standard costing
[B] Historical costing
[C] Unit costing
[D] Marginal costing
27.Management by exception is
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 [A] A method of preparing financial statements
[B] A tool of management accounting
[C] A part of costing method
[D] Not an accounting method
28.Management accounting is most useful to-
[A] Investors [B]Managers [C]Creditors [D]Shareholders
29.The accounts of management accounting is to be prepared in the form of
reports-
[A] Decided by Companies Act 2013
[B] Decided by the government
[C] Which is to be presented in the annual general meeting of
shareholders
[D] Which can be helpful to the managers
30.The main function of management accounting is-
[A] To analyse the financial data and present to the management in
the form of reports
[B] To assist the managers in taking policy decisions
[C] To assist the managers in taking managerial decisions
[D] All of the above
31.The various reports prepared with the methods of management
accounting should be presented to-
[A] Shareholders [B]Investors, creditors, etc.
[C] Various levels of management [D] Stock exchange of India.
32.The main functions of management accountant is-
[A] To prepare various budgets to control business activities
[B] To classify and properly arrange data for presentation before
management

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 [C] To draw the attention of the managers to those activities only
which are not proceeding as planned
[D] All of the above
33.________is not used in management accounting.
[A] Marginal costing [B]Unit costing
[C] Budgetary control [D] Standard costing
34.The prime function of management accounting is to-
[A] Record business transactions
[B] Interpret financial data
[C]Assist the management in performing its functions effectively
[D] Assist tax authorities
35.Which of the following is the technique of management accounting?
[A] Ratio analysis [B] Linear programming
[C] Trend analysis [D] All of the above
36.Management accounting does not include the function of
[A] Planning and control [B] Product costing
[C] Preparation of financial statements [D] Decision making
37.The management accounting data is obtained from the-
[A] Cost accounting [B] Financial accounting
[C] Cost & financial accounting [D] Financial management
38.Ratio analysis is used in :
[A] Financial accounting [B] Cost accounting
[C] Management accounting [D] None
39.Capital budgeting is used for :
[A] Long term investment [B] Short term investment
[C] Working capital [D] Issue of equity shares
40. Which of the following is a source of funds?

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 [A] Equity shares [B] Retained earnings [C] Both a and b [D] None
41. Which one of the following is a capital structure decision?
[A] determining which one of two projects to accept
[B] determining how to allocate investment funds to multiple projects
[C] determining the amount of funds needed to finance customer
purchases of a new product
[D] determining how much debt should be assumed to fund a project
42.Which one of the following is defined as a firm’s short term assets and its
short term liabilities?
[A] Working capital [B] Debt [C] Investment capital [D]Net capital
43.Which one of the following is a capital budgeting decision?
[A] Determining how many shares to issue
[B] Deciding whether or not to purchase a new machine for the
production line
[C] Deciding how to refinance a debt issue that is maturing
[D] Determining how much inventory to keep in hand
44.Which one of the following is a capital structure decision?
[A] Determining which one of two projects to accept
[B] Determining how to allocate investment funds to multiple projects
[C] Determining the amount of funds needed to finance customer
purchases of a new product
[D] Determining how much debt should be assumed to fund a project
45. Which one of the following is a capital structure decision?
[A] Determining how many shares to issue
[B] Deciding whether or not to purchase a new machine for the
production line
[C] Determining how much inventory to keep in hand

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 [D] Determining which one of two projects to accept
46.The decision to issue additional debentures is an example of which one
of the following?
[A] Capital budgeting decision [B]Capital structure decision
[C] Working capital management [D] Controller’s duties
47.Which of the following accounts are included in working capital
management?
[A] Accounts receivable [B] Debentures
[C] Building [D] Trade investments
48.Which one of the following is a working capital management decision?
[A] Determining the amount of equipment needed to complete a job
[B] Determining the amount of long term debt required to complete a
job
[C] Determining the number of shares of stock to issue to fund an
acquisition
[D] Determining whether to pay cash for a purchase or use the credit
offered by the supplier
49.Which one of the following best states the primary goal of financial
management?
[A]Maximize assets [B] Profit Maximization
[C] Increase cash flow [C] Maintain steady growth
50.Which of the following represents cash outflows?
[A] Issuance of securities [B] Payment of dividends
[C] New loan proceeds [D] Credit purchases
51.Which of the following terms is defined as the management of a firm’s
long-term investments?
[A] Working capital management [B] Financial allocation

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 [C] Capital budgeting [D] Capital structure
52.Which of the following terms is defined as the management of a firm’s
long-term financing?
[A] Working capital management [B] Financial allocation
[C] Capital budgeting [D] Capital structure
53.Which of the following statements is the related to management
accounting?
[A] Profit and loss statement [B] Cash budget
[C] Cash flow statement [D] Balance sheet
54.Which of the following techniques is not related to management
accounting?
[A] Standard costing [B] Budgetary control
[C] Variance analysis [D]Financial statements
55.Financial accounting is concerned with
[A] Knowing the profits earned during the year
[B] Finding the causes of declining profits
[C] Deciding about the future investing decisions
[D]Determining the source of financing
56.Which of the following is not a characteristic of management accounting?
[A] It emphasis on futuristic decisions
[B] It is collection of historical information
[C] It finds reasons of loss suffered
[D] It divides costs into variable, semi-variable and fixed
57.Management accounting is not just concerned with
[A] Knowing the profits earned during the year
[B] Finding the causes of declining profits
[C] Deciding about the future investing decisions

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 [D] Determining the source of financing
58.For Management accounting, which is not applicable
[A] No rules and conventions
[B] Fixed rules for preparing statements
[C] Comparison of actual and budgeted activity
[D]Responsibility is fixed in case of deviation
59.In management accounting internal audit is to be done-
[A] Compulsory every year [B] Compulsory twice in a year
[C]Compulsory every quarter [D] Voluntarily
60.Which of the following is not a tool of management accounting?
[A] Decision accounting [B] Standard costing
[C] Budgetary control [D]Human Resources Accounting
61.Which of the following is an advantage of management accounting?
[A] Presents only past data
[B]Useless for controlling
[C] Presents dead figures, not interpretation
[D]Useful for taking decisions
62.Financial accounting deals with
[A] Quantitative information [B]Qualitative information
[C] Both a and b [D]None of the above
63.Which of the following tools and techniques are used by management
accountant?
[A] Standard costing [B] Process costing
[C] Operating costing [D] Unit costing
64.Which of the following is false for financial accounting?
[A] It is very expensive
[B] It makes use of various techniques

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 [C] It is a tool for decision making
[D] It provides useful accounting data for policy decisions
65.Cost accounting is not compulsory for
[A] Manufacturing concerns [B] Mining firms
[C] Trading entities [D] Processing units
66.In management accounting statements are prepared –
[A] At the end of financial year [B] Twice in a year
[C] Several times as per requirement [D] Quarterly in a year
67.Which of the following represents cash outflows ?
[A] Provision for taxes [B] Payment of interest
[C] Issue of debentures [D] Credit purchases
68.Which of the following represents cash outflows ?
[A] New loan form banks [B] Credit purchases
[C] Redemption of preference shares [D] Equity shares issue
69.Which of the following represents cash inflows ?
[A] Purchase of fixed asset [B] Sale of investments
[C] Repayment of bank loan [D]Goods sold on credit
70.Management accounting is concerned with
[A] Short term planning [B]Long term planning
[C] Short and long term equally [D] None

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SECTION C :LONG QUESTIONS

1. What do you mean by management accounting? Explain giving examples.

2. What are the functions of a management accountant?
3. Explain the benefits of management accounting.
4. Distinguish management accounting from financial accounting and cost
accounting
5. Explain the limitations of management accounting.
SECTION C : SHORT QUESTIONS

1. State the scope of Management accounting.

2. State any two functions of management accounting.
3. Give two differences between cost accounting and management
accounting.
4. Give two differences between financial accounting and management
accounting.
5. Explain the nature of Management Accounting in brief.

References :

1 Tandon, P.L.: "The Role of Management Accountants in General

Management”. 4th All India Seminar on Management Accounting, Lucknow,
Feb. 1963.
2. President (1991-92), The Institute of Management Accountants, USA.

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