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Chapter 16: 16-1SE_e (page 885)

Comparing managerial accounting and financial accounting

For each of the following, indicate whether the statement relates to managerial accounting (MA) or financial accounting (FA):

e. Reports audited annually by independent certified public accountants

Short Answer

Expert verified

Financial accounting is involved in the audit of reports annually

Step by step solution

01

Definition of Audit

An audit is defined as an official inspection of the financial accounts of a business organization, by an independent body.

02

Identification of accounting

The correct option is financial accounting.

The audit is done of the financial statement of the company to check the reliability of the financial statements. Financial accounting helps in the preparation of financial statements.

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Most popular questions from this chapter

Give five examples of manufacturing overhead.

This is the first problem in a sequence of problems for Piedmont Computer Company, a manufacturer of personal computers and tablets. During its first month of manufacturing, Piedmont Computer Company incurred the following manufacturing costs:

Balances: Beginning Ending

Direct Materials \( 10,500 \) 9,700

Work-in-Process Inventory 0 17,000

Finished Goods Inventory 0 31,000

Other information:

Direct materials purchases $ 16,000

Plant janitorial services 500

Sales salaries expense 10,000

Delivery expense 1,600

Sales revenue 1,100,000

Utilities for plant 16,000

Rent on plant 9,000

Customer service hotline costs 19,000

Direct labor 210,000

Prepare a schedule of cost of goods manufactured for Piedmont Computer Company for the month ended January 31, 2020.

Describe a merchandising company, and give an example.

Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA):

5. Summary reports prepared quarterly or annually.

Question:Applying ethical standards

Natalia Wallace is the new controller for Smart Software, Inc. which develops and sells education software. Shortly before the December 31 fiscal year-end, James Cauvet, the company president, asks Wallace how things look for the year-end numbers. He is not happy to learn that earnings growth may be below 13% for the first time in the company鈥檚 five-year history. Cauvet explains that financial analysts have again predicted a 13% earnings growth for the company and that he does not intend to disappoint them. He suggests that Wallace talk to the assistant controller, who can explain how the previous controller dealt with such situations. The assistant controller suggests the following strategies:

a. Persuade suppliers to postpone billing \(13,000 in invoices until January 1.

b. Record as sales \)115,000 in certain software awaiting sale that is held in a public warehouse.

c. Delay the year-end closing a few days into January of the next year so that some of the next year鈥檚 sales are included in this year鈥檚 sales.

d. Reduce the estimated Bad Debts Expense from 5% of Sales Revenue to 3%, given the company鈥檚 continued strong performance.

e. Postpone routine monthly maintenance expenditures from December to January.

Requirements

1. Which of these suggested strategies are inconsistent with IMA standards?

2. How might these inconsistencies affect the company鈥檚 creditors and stockholders?

3. What should Wallace do if Cauvet insists that she follow all of these suggestions?
See all solutions

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