Exercise 19-1 Richard Larkin has prepared the following list of statements about

Question

Exercise 19-1 Richard Larkin has prepared the following list of statements about managerial accounting and financial accounting. Identify each statement as true or false. 1. Financial accounting focuses on providing information to internal users. 2. Analyzing cost-volume-profit relationships is part of managerial accounting. 3. Preparation of budgets is part of financial accounting. 4. Managerial accounting applies only to merchandising and manufacturing companies. 5. Both managerial accounting and financial accounting deal with many of the same economic events. 6. Managerial accounting reports are prepared only quarterly and annually. 7. Financial accounting reports are general-purpose reports. 8. Managerial accounting reports pertain to subunits of the business. 9. Managerial accounting reports must comply with generally accepted accounting principles. 10. Although managerial accountants are expected to behave ethically, there is no code of ethical standards for managerial accountants

Explanation / Answer

FALSE, financial accounting focuses on providing information to external users. TRUE, Cost volume profit relationship is part of managerial accounting. FALSE, budget preparation is part of managerial accounting. FALSE, Managerial Accounting applies to all types of business organizations which include merchandising, manufacturing, service and all forms of business organizations. FALSE, Managerial Accounting and financial accounting does not deal with same economic event. FALSE, Managerial Accounting reports can be generated for any period, it can be daily, weekly, monthly, quarterly or yearly. TRUE, financial statements can be used by external and as well as internal users. Hence such reports are general purpose reports. FALSE, Managerial accounting reports pertains to the company as a whole. FALSE, Managerial accounting reports are not subject to reporting according to Generally Accepted Accounting Principles. FALSE, The Institute of Management Accountants (IMA) has developed standards of ethical professional conduct and managerial accountants are bound to it.

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