Principles of Accounting: Chapter Seventeen

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Chapter 17 introduces the subject of managerial accounting. Managerial accounting relates to reporting internal to an organization, and is far less structured than the rules-based system applicable to financial (external) reporting. Managerial accounting broadly entails many activities that relate to planning, directing, and controlling. This framework supports management decisions and drives the creation of business value.

The chapter provides a high-level introduction to planning activities related to strategy, positioning, and budgets. This is followed by discussions of key directing activities that pertain to costing, production, and analysis. Controlling activities necessary to manage a successful organization are also introduced. Each of the topics covered in the chapter opening is elaborated upon in subsequent chapters.

This chapter also identifies key terms and concepts applicable to managerial accounting. Product costs consist of direct materials, direct labor, and manufacturing overhead. Great care is given to defining these important concepts. Other costs are generally considered to be period costs. Manufacturers have unique measurement and reporting issues, including categorization of inventory into raw material, work in process, and finished goods. The chapter illustrates how these costs flow through the reporting framework.

Exercises

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Problems
Goals Achievement
Fill in the Blanks
Multiple Choice
Objectives
Key Terms

Fill in the Blanks: Chapter Seventeen

1. One primary difference between financial and managerial accounting is that financial is geared mainly toward the needs of ____________ external users, whereas managerial is geared mainly toward the needs of ____________ internal users.Correct

2. Because of its expanding role, complexity, and areas of involvement, managerial accounting is increasingly referred to as ____________strategic finance.

3. Business value is driven by good management decisions in the areas of ____________planning, ____________directing, and ____________controlling.

4. A business should carefully define and communicate its ____________core values to set the rules by which it will play.

5. ____________Cost Accounting can be defined as the collection, assignment, and interpretation of cost.

6. A relatively modern costing method where costs are attributed to activities, which are in turn allocated to jobs is ____________activity based costing.

7. Deviations from standards that may require management attention are known as ____________variances.

8. In the manufacture of wooden toy chests, lumber would be an example of ____________direct material and nails would be an example of ____________indirect material.

9. Prime costs consist of ____________direct material and ____________direct labor. Conversion costs consist of ____________direct labor and ____________manufacturing overhead.

10. ____________Product costs are those that go directly into inventory and ____________period costs are those that are deducted as expenses in the period in which they are incurred.

11. The three categories of inventory for a manufacturer are ____________raw material, ____________work in process, and ____________finished goods.

12. An inventory account that would be found only on the balance sheet of a manufacturer is ____________work in process.

13. Total production costs differ from the cost of goods manufactured due to the change in ____________work in process inventories from the beginning of the year to the end of the year.