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MULTIPLE CHOICE
Basic concepts
1. Management accounting
A. Is governed by generally accepted accounting principles.
B. Draws from disciplines other than accounting.
C. Is geared primarily to the past rather than the future.
D. Places more emphasis on precision of data compared with financial accounting which does not
place more emphasis on accuracy of information. (rpcpa)
1. B
? A true statement about management accounting.
Choice-letter “b” is correct. Management accounting draws techniques from disciplines other than
accounting. Management accounting has the following characteristics: it concerns with the future data
and not of the past, it uses knowledge from different fields of disciplines, its places more emphasis on
timeliness and relevance than on accuracy and precision, its information is segmentized and not
wholistic, it has no unifying equation, its client is the management and not the general public, and it is
not governed by the generally accepted accounting principles but by the needs of the management.
Choice-letters “a”, “c”, and “d” are all incorrect assertions with respect to management accounting,
but are true assertions with respect to financial accounting.
2. Management accounting is an integral part of the management process. As such, it provides essential
information for the following objectives except
A. Maintaining the current level of resources utilization as well as internal and external
communication.
B. Measuring and evaluating performances.
C. Planning strategies and controlling current activities of the organization.
D. Enhancing objectivity in decision-making. (rpcpa)
2. D
? The one that does not relate to the primary objective of management accounting.
Choice-letters “a”, “b”, and “c” are objectives of management accounting (e.g., communication,
performance evaluation, and planning and controlling ). Choice-letter “d” is not a primary objective of
management accounting because enhancing objectivity in decision-making by providing relevant and
reliable information to management is inherent in, and therefore is not an objective of, the
management accounting process.
3. The chief management accountant called “controller” traditionally performs these functions except
A. The establishment and implementation of the financial planning process.
B. Financial and management reporting and interpretation.
C. Protection of company resources and economic evaluation.
D. Relate to specific problems where expert help is required. (rpcpa)
3. D
? The one that is not a function of a controller.
Choice-letter “d” is the best answer. Although controllership needs expert’s help in the performance of
duties, it however, deals with developing and installing control mechanisms in the area of general
management, first, before routinary specific controls are provided.
Choice-letters “a”, “b”, and “c” are all functions performed by a controller such as the establishment
and implementation of the financial planning process, financial and management reporting and
interpretation, protection of company resources, and economic evaluation.
4. The chief management accountant called “controller” traditionally performs these functions except
A. The establishment and implementation of the financial planning process.
B. Financial and management reporting and interpretation.
C. Protection of company’s resources and economic conditions.
D. Preparation of proposals for product promotions. (rpcpa)
4. D
? The one that is not performed traditionally by a controller.
The controller has the following functions: planning and controlling, protections of assets reporting,
economic appraisal, government relations and evaluation, and tax administration. What is not included
as a function of a controller is choice-letter “d”, preparation of proposals for product promotion, which
is more a function of the marketing manager.
5. A
? A controller’s responsibility.
Choice letter “a” is correct. Tax administration, which includes tax planning and accounting, is a
controller’s responsibility. Choice-letters “b”, “c”, and “d” are incorrect because custodianship of funds,
credit and collection, and arranging short-term loans and financing are functions of a treasurer.
6. Management accountants help design, develop, install and maintain reporting systems which
are aligned with the structures of the organization. These systems provide information that
are useful for decision making. Management decision processes fall into three categories.
A. Repetitive, non programmed, and strategic.
B. Repetitive, programmed, and strategic.
C. Repetitive, programmed and non strategic.
D. Non-repetitive, non programmed, and strategic. (rpcpa)
6. A
? Three (3) categories of management decision processes.
The management decision processes may be classified as repetitive, non-programmed and strategic.
Strategic decisions gear towards long-term objectives, positions, structures, orientations, competitive
advantage, aims, and aspirations of the company. It deals with the stability and growth of the company
and primarily satisfies the needs and desires of investors. In contrast, tactical decisions deal with the
short-term goals that are normally related to the profit-making activities of the company. Tactical
decisions concerns with liquidity, profitability, and working capital policies.
Repetitive decisions are those routinary in nature and may be predicted, standardized, planned
and easily controlled. These decisions are normally operating in nature and relate with the working
capital cycle involving transactions with suppliers, customers, employees, utility companies,
government and other entities regularly dealt with by the business. These repetitive decisions are
captured and expressed in standard operating policies that serve and guide us in standard costing,
budgeting, marginal costing, variance investigation and similar routinary management activities.
Non-programmed decisions are those that are not covered by repetitive and strategic decisions
and deal with both the short-term and long-term objectives of the business. These decisions are not
normally guided by written policies but highly require value judgment of the implementing manager.
7. In this element of internal control, the object is to gauge the efficiency of the various levels of people in
the organization as well as the quality and quantity of results.
A. Records and reports. C. Internal audit.
B. Standards of performance. D. Policies and procedure. (rpcpa)
7. B
? The one that has the purpose of gauging the efficiency of the various levels and people in the
organization as well as the quality and quantity of results.
Standards of performance measure personnel’s efficiency (quality) and productivity (quantity) by
comparing the actual results with established standards. This is important in controlling and directing
operational activities to align actual results with plans (choice-letter “b” is correct).
Choice-letter “a” is incorrect because reports and records are communicated results of
performance that are primarily meant to inform based on verifiable and objective records. Choice-
letter “c” and “d” are not correct because internal audit deals with the accuracy of records and
operational efficiency, effectiveness, and economy in relation to internal controls which encompass
the policies and procedures set by the organization.
9. B
? To identify some of the controller’s traditional functions.
Controllers have the following functions: planning and controlling, reporting, evaluation of
performance, government relations, protection of assets, economic appraisal, and tax administration.
Credit management, sourcing and investing of funds, and risk management are treasurer’s
functions, including that of provision for capital, investors’ relations and banking and custodian.
11. D
? An area where controllers are not concerned with.
Choice-letter “d” is a function of a treasure, not of a controller, and therefore is the correct answer.
Choice-letters “a”, “b”, and “c” are controller’s functions.
12. You were newly appointed as controller of CRZ Corporation. Among the jobs your department
would do, include the following:
A. Cash receipts, cash disbursement, general accounting, taxation, financial statements analysis and
internal auditing.
B. Financial reporting, strategic planning, managerial accounting, taxation, financial statement
analysis and internal accounting.
C. Financial accounting, managerial accounting, cost accounting, inventory accounting, payroll
accounting, tax accounting, and sales forecasting.
D. Tax accounting, internal accounting, internal auditing, general accounting . rpcpa)
12. B
? The jobs the controllership department normally do.
Controllership deals with structures and systems to facilitate smooth business activities of generating
wealth. The traditional functions of controllership are planning and controlling, reporting of financial
information, evaluating performances, government relations and reporting, protecting assets or
resources, economic appraisal, and tax administration. Choice-letter “b” is the best choice.
Choice-letter “a” is incorrect because cash receipts and disbursements are treasurership functions.
Choice-letter “c” is incorrect because sales forecasting is sales functions. Choice-letter “d” is incorrect
because internal auditing, under the emerging practice, now belongs to the audit committee or to the
office of the Chief Executive Officer to maintain independence and utmost objectivity.
13. D
? The statement that does not distinguish management accounting from financial accounting.
Choice-letters “a”, “b” and “c” are distinctions between management accounting and financial
accounting. Choice-letter “d” is not a distinction because delayed information which are only made
available after the decision has been made would virtually make the information worthless. This
statement is not a distinction but is both an antithesis of relevant financial accounting and
management accounting information.
14 C
? The one that does not refer to financial accounting.
Choice-letter “c” is correct because financial accounting has an externally imposed standards called as
the generally accepted accounting principles. Choice-letters “a”, “b”, and “d” are all characteristics of
financial accounting.
15. Which of the following characteristics does not relate to management accounting?
A. Accounting reports may include non-monetary information.
B. It is subject to restrictions imposed by GAAP.
C. Reports are often based on estimates and are seldom useful for everything other than the purpose
for which they are prepared.
D. It provides data for external users within the business organizations. (rpcpa)
15. B
? The one that does not relate to management accounting.
Choice-letter “b” is correct because management accounting is not subject to restrictions imposed by
GAAP. Choice-letters “a”. “c”, and “d” are incorrect because they all relate to management accounting.
16. C
? The one that relates to financial accounting.
Financial accounting should be relevant, its data are both historical and estimates, it adheres to GAAP,
and it also provides data to management accounting in making decisions. However, among the choices
given, the most important and unique characteristics of financial accounting is choice-letter “c”.
17. C
? The one that sets the guidelines in preparing a management report.
Choice-letter “c” is correct because management accounting reports are for management’s use only
who sets the format in preparing a management accounting report.
Generally accepted accounting principles (GAAP), which govern the preparation of external
accounting reports, are not used in the field of management accounting that prepares reports for
management, or internal, use only. The Securities and Exchange Commission (SEC) and Philippine
Institute of Certified Public Accountants (PICPA) do not, and have no inherent authority to, prescribe
guidelines on how information for management’s use only should be prepared.
18. A
? Identify the given statements as true or false.
Statement 1 is true. Statement 2 is false because management accountant reports do not conform
with GAAP. Statement 3 is false because accounting, including management accounting, makes
reports primarily in financial nature or in other quantitative methods of measurement to emphasize
objectivity in reporting. Hence, Choice-letter “a” is the correct answer.
Miscellaneous
19. Which of the following represents an internal control weakness in a payroll system?
A. Payroll department personnel are related in their duties.
B. Timekeeping is independent of the payroll department.
C. Payroll records are reconciled with quarterly tax reports.
D. Paychecks are distributed by the employees’ immediate superior. (rpcpa)
19. D
? The statement that represents an internal control weakness in a payroll system.
The internal control structure of an organization must primarily be set to protect the assets, check the
accuracy and reliability of accounting data, promote operational efficiency, and encourage adherence
to prescribed managerial policies. In so doing, the organization plan and structures should be properly
designed to ensure that transactional responsibilities are properly segregated. The phases of a
transaction cycle are authorization, execution, recording, custodian and accountability. Choice-letter
“d” is a weakness in internal control because the paychecks are supposed to be distributed by the
custodian (i.e., custodianship) and not by the employees’ immediate superior (i.e., execution).
Choice-letter “a” is a strength in internal control (i.e., employees must be carefully selected and
trained). Choice-letter “b” indicates strong internal control (i.e., execution is separate from recording).
Choice-letter “c” also indicates strong internal control (i.e., all available proof of accuracy must be
utilized).
20. C
? The one that is not a characteristic of a staff authority.
A staff gives support, advises, and services to line authority, and is exercised laterally or upward.
Choice-letters “a” and “b” are therefore not correct. Choice-letter “c” is the correct answer because it
refers to line authority.
21. C
? The incorrect statement.
Choice-letters “a”, “b” and “d” are all correct statements. Choice-letter “c” is not a correct statement
because the basic purpose of costing system is not to allocate costs but to accumulate production costs
for better planning and controlling.
22. The activities in a management system’s control process can be grouped into four:
1. Measurement of actual performance.
2. Deciding and implementing corrective action.
3. Determining standards of performance.
4. Comparing actual performance versus standards and analyzing results.
22. B
? The control process sequence.
The operating control process follows the planning process. The general steps followed in the
operating control process are: establishment of control standards (or standards or performance),
measurement of actual performance, comparison of actual performance with established standards
and analysis of variances, decision and implementation of remedial/corrective actions. Choice-letter
“b” is correct.
23. A
? A statement describing the concept of management by exception.
Choice-letter “a” is correct, management by exception refers to the management control technique of
investigating those variances which materially or significantly deviate from plans. Normal variances
are to be investigated by lower managers while abnormal variances are to be attended to by top
management. Choice-letters “b” and “c” are incorrect because it is amount of the variance, not the
events, not those items selected at random, neither those events that involve material amounts, are
covered by the management by exception.
24. D
? Indicate the given statements as true or false.
Choice-letter “d” is correct. Statement 1 is true. Statement 2 is false because it refers to the cost of
money, not cost accounting which refers to the process of accumulating and processing production
and costs data into a meaningful information to help management in making effective decisions with
respect to the business of running the production operations of the firm.
25. A
? Identify the given statements as true or false.
Choice-letter “a” is correct. Statement 1 is false because the SEC is not the only government agency
that has jurisdiction over corporation in the Philippines. Several government regulatory agencies such
as the Bangko Sentral ng Pilipinas, Insurance Commissions, Energy Regulatory Board, Commission
on Higher Education, and many others have also jurisdiction over corporation within their area of
regulation. Statement 3 is false because as the primary officer in-charge of instituting systems,
reporting, and control, the controller’s job is conceived not to end after a system is developed but to
continue even up to the point of installing and monitoring the effectiveness of the system.
26. C
? Identify the given statements as true or false.
Choice-letter “c” is correct. Statements 1 and 2 are correct. Statement 3 is incorrect because
management by exception refers to the identification of materials variances for top management to
correct and develop policies on how to avoid the same in the future.
28. A type of managerial accounting that refers to the determination of the cost of products and services
regardless of whether they are variable or non-variable is known as
A. Differential accounting. C. Full cost accounting.
B. Activity accounting. D. Responsibility accounting.
28. C
? A type of managerial accounting that refers to the determination of the cost of products and services
regardless of whether they are variable or non-variable.
Full cost accounting (or absorption costing) considers all production costs, whether variable or fixed,
as product costs and are included in the determination of operating costs. Choice-letter “b” is the
correct answer.
Choice-letter “a” is incorrect because differential accounting relates to accounting for those costs
that change from one alternative to another and are used in making economic decisions. Choice-letter
“b” is incorrect because activity accounting may refer to the process of relating costs with cost drivers
that cause costs to be incurred. Choice-letter “d” is incorrect because responsibility accounting does
not primarily relate to cost behavior but relates to organizational structure outlining the distribution and
delegation of authority and responsibility in an organization.
29. A type of managerial accounting that refers to the determination of the operating cost regardless of
cost behavior is
A. Differential accounting. C. Responsibility accounting.
B. Full cost accounting. D. Profitability accounting. (rpcpa)
29. B
? A type of managerial accounting that refers to the determination of the operating cost regardless of cost
behavior.
Full cost accounting (or absorption costing) considers all production costs, whether variable or
fixed, as product costs and are included in the determination of operating costs. Choice-letter “b” is the
correct answer.
Choice-letter “a” is incorrect because differential accounting relates to accounting for those costs
that change from one alternative to another and are used in making economic decisions. Choice-letter
“c” is incorrect because responsibility accounting does not relate to cost behavior but relates to
organizational structure that defines the distribution and delegation of authority and responsibility in an
organization. Normally, responsibility accounting follows flexible budgeting that segregates costs as to
their fixed and variable components. Choice-letter “d” is incorrect because profitability accounting
refers only to the short-term measure of determining operating income or loss based on the methods
and techniques applied to recognize revenue and measure expenses.
done