Question

In: Accounting

Question 4 Explain the difference between financial accounting and management accounting. Ensure your explanation clearly explains...

Question 4

  1. Explain the difference between financial accounting and management accounting.

Ensure your explanation clearly explains the purpose of management accounting.

  1. Car Services Ltd produces custom tow bars and bull bars for utes and cars. Each customer’s order is treated as a separate job so costs can be tracked for each customer.

Tasks

Briefly explain the following:

  1. The meaning of the term cost object. Identify the cost object that would be used by Car Services Ltd when recording costs.
  2. The difference between a direct cost and an indirect cost. Identify examples of both direct costs and indirect costs for the cost object.
  1. Salmon Ltd provides you with the following information on the costs of testing the water quality of their wastewater.

No of tests

Costs

July

30

7,315

August

25

6,500

September

34

8,120

October

28

6,990

November

32

7,950

December

31

7,445

Task

Using the high low method, calculate the fixed cost per month and the variable cost per test.

d) King Ltd uses a job costing system. The company’s budget for the year included a budgeted total manufacturing overhead cost of $1,800,000 and budgeted total direct labour hours of 60,000 hours. Manufacturing overhead cost is applied to jobs based on direct labour-hours worked. During December, King Ltd started and completed one manufacturing job (Job 571). The events of December are:

Direct material cost: Job 571

$215,000

Indirect material cost for December

$55,000

Other manufacturing overhead cost incurred in December

$45,000

Direct labour cost (4,800 hours, including 100 hours idle time)

$120,000

Indirect labour cost for December (excluding idle time)

$40,000                     

Tasks

  1. Calculate the total cost of Job 571.
  2. Determine the amount by which the manufacturing overhead cost is overapplied or underapplied for December.

Solutions

Expert Solution

Solution 1

The differences between financial accounting and management accounting are as follows

Financial accounting generates information for the external users such as creditors, shareholders, government etc whereas Management accounting generates information for the internal users such as the managers, staff etc.

Only financial information is included in the financial accounting whereas both financial and non financial information are included in the management accounting.

Financial accounting lays emphasis on the historical records whereas management accounting lays emphasis on both historical records and future estimates.

The purpose of the financial accounting is to record the financial performance and financial position of an entity for a particular period whereas the purpose of management accounting is to facilitate the management in planning and in making appropriate decisions.

Financial accounting is standardized and the statements are to be prepared in compliance with the regulatory requirements. Management accounting is not standardized. The information required to be presented and its formats are decided upon by the entity.


Related Solutions

Difference between financial accounting and management accounting
Difference between financial accounting and management accounting
List difference between financial and management accounting
List difference between financial and management accounting
Explain the difference between financial accounting and management accounting 2. What are subsidiary ledgers and reconciliation...
Explain the difference between financial accounting and management accounting 2. What are subsidiary ledgers and reconciliation accounts? How are they related? 3. Explain the three transaction types in asset accounting. 4. What are depreciation areas? Why are different depreciation areas necessary? 5. What are charts of accounts and the general ledger? How are they related? 6. Briefly describe the key processes in financial accounting
Explain the arguments for and against market-value accounting. In your answer ensure that you clearly explain...
Explain the arguments for and against market-value accounting. In your answer ensure that you clearly explain “real losses” and “paper losses” and the role of moral hazard in the application of market value accounting.
Question 4 Differentiate between the following: a. Financial accounting and management accounting    b. Accrual and Prepayment.     ...
Question 4 Differentiate between the following: a. Financial accounting and management accounting    b. Accrual and Prepayment.      c. Bad debt and Provision for bad debt.     
Explain the difference between financial and managerial accounting. In your answer, describe the different audiences for...
Explain the difference between financial and managerial accounting. In your answer, describe the different audiences for the two types of accounting and the various individuals involved in the process.
4.a. What is the difference between top-down and bottom-up financial management of a company? Explain briefly....
4.a. What is the difference between top-down and bottom-up financial management of a company? Explain briefly. 4.b. How can we understand and evaluate the cash position of a company? 4.c. Why Working capital management is important? Explain briefly.
a) Explain the difference between accounting policies and accounting practices (4 marks) b) Provide examples for...
a) Explain the difference between accounting policies and accounting practices b) Provide examples for each (4 makrs) nb. seprate a and b
Financial Accounting • Describe and explain the difference between a cash dividend and a stock dividend....
Financial Accounting • Describe and explain the difference between a cash dividend and a stock dividend. What is the number of shares used when computing a dividend? (Review pages 576 to 581). Describe Discontinued Operations for financial statements. Provide a real-life business example for Discontinued Operations for financial statements. Explain how Discontinued Operations items affect the investor’s evaluation of the company’s performance. (Review pages 691 to 693). • “Describe” the Ch10 – debt to assets and times interest earned ratios...
Explain in your own words the difference between demand management and capacity management. Give
Explain in your own words the difference between demand management and capacity management. Give at least two examples for each one.  For group work, students could provide examples of how companies they worked for used capacity and demand management.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT