Chapter 16, Problem 1STQ

To determine

Indicate the statements that are more descriptive of management accounting than of financial accounting.

Answer to Problem 1STQ

b. Information is tailored to the needs of individual decision makers.

d. Emphasis is on expected future results.

Explanation of Solution

Managerial accounting:

Management accounting is a practice whereby management reports and accounts are generated to assist managers in the day to day operations and short term decision making by providing accurate and timely statistical and financial information required by them.

The three principles guiding the design of management accounting systems are as follows:

• It helps to decide who has the decision-making authority over the assets of the company.
• It generates the accounting information that is useful for the purpose of planning and decision making.
• It also provides information for evaluating, monitoring, and rewarding performance.

Financial accounting:

Financial accounting is different from managerial accounting. Financial accounting is the process of preparing financial statements which include income statement, the balance sheet, statement shareholders equity, and statement of cash flows. These financial statements are used by the stakeholders for making investment and lending decisions.