Management Accounting Exam Review
Course Introduction
Management Accounting is an essential course that focuses on the principles, techniques, and tools used by managers to make informed business decisions. The course covers topics such as cost behavior, budgeting, variance analysis, performance measurement, and decision-making processes. Through practical case studies and real-world applications, students learn how to analyze financial information, plan and control operations, and support strategic objectives within an organization. Emphasis is placed on the use of accounting data for internal management rather than for external reporting, equipping students with the skills to contribute to effective business planning and operational efficiency.
Recommended Textbook
Accounting Business Reporting for Decision Making 6th Edition by Jacqueline Birt
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Chapter 1: Introduction to Accounting and Business Decision Making
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Q1) Which of the following are differences between management and financial accounting?
I.Types of reports produced.
II.The users of reports.
III.The format of reports.
IV.Frequency of reports.
A) I and III only.
B) II, III and IV only.
C) I and II only.
D) all of the above.
Answer: D
Q2) The _________________ Act 2001 is the most important Act under the authority of the Australian Securities and Investments Commission.
Answer: Corporations
Q3) The work of recording financial transactions is normally carried out by a _______________ not an accountant.
Answer: bookkeeper
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Chapter 2: Accounting in Society
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Q1) Which of these types of behaviour would be regarded as ethical?
A) Timely disclosure of a pending lawsuit which, if found guilty, will result in the entity being required to pay a substantial amount in damages.
B) Non-disclosure of significant errors in the financial reports.
C) A company director using confidential information for personal gain.
D) Misleading advertising.
Answer: A
Q2) An entity's societal and environmental obligations to all its stakeholders are known as __________________ __________________ __________________.
Answer: corporate social responsibility
Q3) When faced with a moral dilemma,making an ethical decision is:
A) always easy if it will lead to a profitable outcome.
B) difficult, as the decision may be controversial.
C) unnecessary.
D) easy as there is always one simple solution to the problem.
Answer: B
Q4) _____________________ theory suggests that entities must operate within the bounds and norms of society.
Answer: Legitimacy
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Chapter 3: Business Structures
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Q1) _____________ _____________ represent a company's profits that have been held in the business and not paid out as dividends
Answer: Retained earnings
Q2) If total liabilities increased by $35 000 and equity increased by $15 000 over a period,then total assets must have changed by?
A) $50 000 decrease.
B) $20 000 increase.
C) $20 000 decrease.
D) $50 000 increase.
Answer: D
Q3) In Australia a discretionary trust is also known as a _____________ trust.
Answer: family
Q4) Which financial statement must be prepared before others can be completed?
A) Statement of cash flows.
B) Balance sheet.
C) Income statement.
D) Statement of financial position.
Answer: C
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Chapter 4: Business Transactions
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Q1) A _____________ account is used to summarise transactions that affect a particular item in the accounting reports. e.g. sales.
Q2) For the accounting equation to balance each transaction must:
A) affect the same number of asset and liability accounts.
B) always affect two accounts.
C) affect two or less accounts.
D) affect two or more accounts.
Q3) If a transaction causes an asset account to decrease,which of the following effects of equal amount may also occur?
A) A decrease in a liability account.
B) A decrease in another asset account.
C) A increase in an equity account.
D) An increase in a liability account.
Q4) Which of the following would be recognised as a transaction on credit?
A) Payment of salaries.
B) Depreciation of motor vehicle.
C) Owner drawings.
D) Purchasing inventory on account.
Q5) Profit (or loss)= ___________________ less expenses
Page 6
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Chapter 5: Balance Sheet
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Q1) The balance sheet usually reports the entity's financial position for both the current period and the previous period.This information is known as:
A) comparative information.
B) comprehensive information.
C) financial reporting.
D) narrative information.
Q2) The amount recognised in the asset class 'investments accounted for using the equity method' represents:
A) cost of shares acquired less share of other entity's profits.
B) share of other entity's profits only.
C) cost of shares acquired less share of other entity's profits plus dividends received from other entity.
D) cost of shares acquired plus share of other entity's profits less dividends received from other entity.
Q3) If an asset's carrying amount is greater than its recoverable amount an __________ loss will need to be recognised immediately in the statement of profit or loss.
Q4) The existence of a _____________ event is one of the essential elements of a liability.
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Chapter 6: Statement of Profit or Loss and Statement of Changes in Equity
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Q1) For a retail entity,cost of sales is calculated as follows:
A) ending inventory + purchases - beginning inventory.
B) purchases - ending inventory - beginning inventory.
C) beginning inventory - purchases + ending inventory.
D) beginning inventory + purchases - ending inventory.
Q2) If sales = $455 000,purchases = $225 000,beginning inventory = $150 000 and ending inventory = $118 000,gross profit is:
A) $198 000
B) $257 000
C) $75 000
D) $230 000
Q3) For a retailing or manufacturing entity,gross profit is equal to sales less:
A) purchases.
B) all expenses.
C) cost of sales.
D) all expenses other than cost of sales.
Q4) A financial analyst is more interested in:
A) post-tax profit as a means of assessing profitability.
B) pre-tax profit as it
Q5) The statement of profit or loss measures an entity's financial
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Chapter 7: Statement of Cash Flows
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Q1) Which of the following items would be classified as investing activities in a statement of cash flows?
A) Proceeds from dividends.
B) Proceeds from borrowings.
C) Proceeds from customers.
D) Proceeds from sale of machinery.
Q2) From the information below,the total net cash flow from investing activities is:
Borrowed $15 000 cash
Sold motor vehicle $1400
Paid Income tax $20 000
Paid Dividends $8500
Received cash from customers $18 000
Cash purchase of furniture $2700
Depreciation on furniture $270
A) an inflow of $1400.
B) an outflow of $2700.
C) an inflow of $6500.
D) an outflow of $1300.
Q3) Cash flows from investing activities arise from changes in non- ___________ ____________ on the balance sheet.
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Chapter 8: Analysis and Interpretation of Financial Statements
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Q1) If the beginning balance of inventory is $16 000 and the ending balance is $30 000,credit sales for the period are $420 000 and cost of sales are $380 000,the days inventory calculation is:
A) 29 days.
B) 22 days.
C) 20 days.
D) 26 days.
Q2) In a vertical analysis,the anchor point for accounts payable is:
A) total assets.
B) total current liabilities.
C) total liabilities.
D) total equity.
Q3) An entity's profit margin is affected by which of the following ratios?
A) Gross profit margin and expense ratios.
B) Inventory and debtors days ratios.
C) Gross profit margin and return on assets.
D) Debt and equity ratios.
Q4) ____________________ is excluded from the quick ratio as it is the asset that takes the longest to convert to cash.
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Chapter 9: Budgeting
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Q1) Applicable budgets for an accounting firm are likely to include:
A) budgeted balance sheet.
B) expenses budget.
C) labour budget.
D) each of the above budgets.
Q2) Which of the following would be included in the operating budgets for a trampoline park?
A) The sales or fees budget and the budgeted statement of profit or loss.
B) The sales or fees budget, the operating expenses budget and the capital expenditure budget.
C) The sales or fees budget and the cash budget.
D) The sales or fees budget, the labour budget, and the operating expenses budget.
Q3) Which of the following budgeted expenses has a favourable variance?
A) Advertising $30 000, actual advertising $40 000.
B) Telephone $4 000, actual telephone $3 700.
C) Salary and wages $52 000, actual salary and wages $56 000.
D) Interest $500, actual interest $500.
Q4) A program budget is commonly used in the __________ and not-for-profit sector.
Q5) Budgets provide the financial frameworks for an entity's _______________ plan.
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Chapter 10: Costvolumeprofit Analysis
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Q1) Using the information below,calculate the weighted average contribution margin. \(\begin{array}{|l|r|r|}
\hline & \text{ Product A} & \text{ Product B } \\
\hline \text{ Contribution margin }&\$ 60.00 &\$ 20.00 \\
\hline \text{ Sales Mix }& 40 \% & 60 \% \\
\hline \text{ Fixed costs \$ 30000} & & \\ \hline
\end{array}\)
A) $36
B) $42
C) $32
D) $48
Q2) Which of the following statements is correct? If the activity level goes outside the relevant range:
A) fixed costs can no longer be assumed to be fixed.
B) fixed costs will remain constant.
C) fixed costs will always increase.
D) fixed costs will always decrease.
Q3) The mix between fixed and variable costs in the cost structure of an entity is known as operating _______________.
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Chapter 11: Costing and Pricing in an Entity
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Q1) The deliberate act of setting prices low to eliminate market competition and then raising prices once the competition is removed is known as:
A) predatory pricing.
B) penetration pricing.
C) dumping.
D) collusive pricing.
Q2) In a _______________ costing system,the raw materials used are the direct costs,while the indirect costs are represented by labour and other indirect manufacturing costs.
Q3) A cost object is an object that has a __________________ measurement of cost.
Q4) In the activity hierarchy,costs incurred for the benefit of a group of products simultaneously are known as ________________ level costs.
Q5) Under the activity hierarchy of costs,costs incurred for the benefit of the entire entity (e.g.cost of operating the head office)are classified as:
A) unit level costs.
B) batch level costs.
C) product level costs.
D) facility level costs.
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Chapter 12: Capital Investment
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Q1) An advantage of the payback period method of investment analysis is:
A) it treats all cash inflows equally over the investment period.
B) it provides a crude measure of the riskiness of a project.
C) it ignores all cash inflows after payback has occurred.
D) it is difficult to calculate.
Q2) If the interest rate is 8%,receiving $10 000 in 3 years' time is equivalent to receiving what amount today?
A) $10 000
B) $7 938
C) $3 880
D) $9 2559
Q3) Making an investment decision also requires consideration of:
A) any taxation impacts.
B) social responsibilities.
C) available monetary and human resources.
D) All of the above require consideration.
Q4) The cost of forgoing benefits from an alternative investment is known as the ___________ cost.
Q5) Once an investment decision has been made,the next step is often the ___________ decision.
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Chapter 13: Financing the Business
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Q1) Finance leases are (cancellable/non-cancellable)___________________ contractual arrangements.
Q2) Issues that require an entity to manage its cash include:
A) the cost of not having enough cash.
B) the need to have sufficient cash to meet commitments.
C) the timing of cash flows.
D) all of these issues require cash management.
Q3) Which of the following statements about equity finance is true?
A) Ordinary shares are the main type of shares issued.
B) Preference shares normally dont have voting rights attached.
C) Ordinary shares have no fixed maturity date.
D) All of these statements are true.
Q4) One aspect of managing the entity's credit policy is selecting suitable_____________ customers.
Q5) Which of the following is a benefit of keeping inventory on hand?
A) Sales are made and profits are gained.
B) Cross-sales are made and profits increased.
C) All of these options are benefits of holding inventory.
D) Goodwill is built up and no-inventory costs are avoided.
Page 15
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Chapter 14: Performance Measurement
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Q1) A term for a division,segment or branch of an organisation is:
A) business unit.
B) entity.
C) corporation.
D) firm.
Q2) The format generally used when reporting on divisional performance is a:
A) gross profit format.
B) net profit format.
C) contribution margin format.
D) a balance sheet format.
Q3) A disadvantage of using economic value added as a performance indicator is:
A) complex modifications to the formula.
B) modifications can be manipulated.
C) it is a short-term performance indicator.
D) all of the above.
Q4) The ___________ value added performance measure is based on the economic increase in an organisation's value after a suitable charge for capital is deducted.
Q5) If return on sales is 12% and investment turnover is 1.25 times,then the return on investment is ____________.
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