Final Exam

A. MIDTERMS

I. Answer the following questions:

1. Cite at least five (5) differences between management accounting and financial accounting.

| Financial Accounting | Management Accounting |

Format: | Financial accounts are supposed to be in accordance with a specific format by IAS so that financial accounts of different organizations can be easily compared. | No specific format is designed for management accounting systems. |

Planning and control: | Financial accounting helps in making investment decision, in credit rating. | Management Accounting helps management to record, plan and control activities to aid decision-making process. |

External Vs. Internal: | A financial accounting system produces information that is used by parties external to the organization, such as shareholders, bank and creditors. | A management accounting system produces information that is used within an organization, by managers and employees. |

Focus: | Financial accounting focuses on history. | Management accounting focuses on future & Present. |

Users: | Financial accounting reports are primarily used by external users, such as shareholders, bank and creditors. | Management accounting reports are exclusively used by internal users’ viz. managers and employees. |

Reporting frequency and duration: | Well-defined - annually, semi-annually, quarterly | As needed - daily, weekly, monthly. |

Optional?: | Preparing financial accounting reports are mandatory especially for limited companies. | There are no legal requirements to prepare reports on management accounting. |

Objectives: | The main objectives of financial accounting are :i) to disclose the end results of the business, and ii) to depict the financial condition of the business on a particular date. | The main objectives of Management Accounting are to help management by providing information that used by management to plan, evaluate, and control. |

Legal/rules: | Drafted according to GAAP -...