Q.1 What is the primary purpose of management accounting?
To record financial transactions for external reporting
To provide information for internal decision-making
To comply with tax regulations
To audit financial statements
Explanation - Management accounting focuses on providing information to managers to assist in planning, controlling, and decision-making.
Correct answer is: To provide information for internal decision-making
Q.2 Which of the following is NOT a function of management accounting?
Budgeting
Financial reporting to shareholders
Cost analysis
Performance evaluation
Explanation - Management accounting is primarily for internal purposes; reporting to shareholders is a function of financial accounting.
Correct answer is: Financial reporting to shareholders
Q.3 Management accounting information is generally:
Historical
Future-oriented
Only audited
Optional for managers
Explanation - Management accounting focuses on forecasting, planning, and decision-making, so it is often forward-looking.
Correct answer is: Future-oriented
Q.4 Which of the following is an example of a management accounting report?
Balance Sheet
Profit and Loss Account
Budget report
Tax Return
Explanation - Budget reports are internal reports prepared for management planning and control, typical in management accounting.
Correct answer is: Budget report
Q.5 Which statement is true about management accounting?
It is mandatory for legal purposes
It helps in strategic planning
It only records past transactions
It replaces financial accounting
Explanation - Management accounting provides insights and data to help managers plan and make strategic decisions.
Correct answer is: It helps in strategic planning
Q.6 Which of the following is a cost classification important in management accounting?
Fixed and variable costs
Revenue and expenditure
Assets and liabilities
Equity and debt
Explanation - Management accounting distinguishes costs by behavior (fixed vs variable) to aid in decision-making and budgeting.
Correct answer is: Fixed and variable costs
Q.7 The main users of management accounting reports are:
Shareholders
Government authorities
Managers
Creditors
Explanation - Management accounting information is primarily prepared for internal management to aid in operational and strategic decisions.
Correct answer is: Managers
Q.8 Which of the following best describes 'decision-making' in management accounting?
Recording financial transactions
Choosing among alternatives using accounting information
Preparing annual reports
Auditing financial statements
Explanation - Decision-making in management accounting involves analyzing data to select the best course of action.
Correct answer is: Choosing among alternatives using accounting information
Q.9 Which type of cost is most relevant for short-term decision-making?
Sunk cost
Variable cost
Fixed cost
Historical cost
Explanation - Variable costs change with the level of production and are relevant for short-term decision-making, unlike sunk or fixed costs.
Correct answer is: Variable cost
Q.10 Management accounting information is generally:
Highly regulated
Confidential
Publicly disclosed
Prepared annually only
Explanation - Since management accounting is for internal use, its information is usually confidential and not shared with the public.
Correct answer is: Confidential
Q.11 Which of the following is a primary objective of management accounting?
Tax compliance
Maximizing shareholder wealth
Facilitating decision-making
Preparing statutory reports
Explanation - Management accounting aims to provide relevant information for effective decision-making within an organization.
Correct answer is: Facilitating decision-making
Q.12 Management accounting uses which type of data?
Only financial data
Only non-financial data
Both financial and non-financial data
No data, only projections
Explanation - Management accounting integrates both financial and operational data to help managers make better decisions.
Correct answer is: Both financial and non-financial data
Q.13 Which of the following is a tool of management accounting?
Cost-volume-profit analysis
Auditor’s report
Income tax filing
Bank reconciliation
Explanation - Cost-volume-profit (CVP) analysis is a management accounting tool used for planning and decision-making.
Correct answer is: Cost-volume-profit analysis
Q.14 Budgeting in management accounting is mainly used for:
Recording past financial transactions
Planning and controlling operations
Preparing tax returns
Auditing financial statements
Explanation - Budgets are used to forecast future operations and control actual performance against planned targets.
Correct answer is: Planning and controlling operations
Q.15 The difference between actual cost and standard cost is called:
Profit
Loss
Variance
Budget
Explanation - Variance analysis in management accounting measures the difference between actual and standard costs for performance evaluation.
Correct answer is: Variance
Q.16 Which of the following costs is irrelevant in decision-making?
Future costs
Opportunity costs
Sunk costs
Incremental costs
Explanation - Sunk costs are past costs that cannot be changed by any decision and are therefore irrelevant.
Correct answer is: Sunk costs
Q.17 Management accounting helps managers in:
Preparing financial statements for shareholders
Determining tax liabilities
Cost control and planning
Auditing financial accounts
Explanation - Management accounting provides tools and reports for budgeting, planning, and controlling costs.
Correct answer is: Cost control and planning
Q.18 The term 'management accounting' was first used in:
19th century
20th century
18th century
21st century
Explanation - Management accounting emerged as a formal field of study in the early 20th century to support managerial decision-making.
Correct answer is: 20th century
Q.19 Which of the following is an example of non-financial information in management accounting?
Number of units produced
Cost of raw materials
Salary paid to employees
Depreciation of machinery
Explanation - Non-financial data, such as production volume, is used in management accounting for planning and performance evaluation.
Correct answer is: Number of units produced
Q.20 Management accounting reports are typically prepared:
Monthly or as needed
Only annually
Only quarterly for shareholders
After tax filing
Explanation - Management accounting reports are prepared frequently, often monthly or as required, to aid decision-making.
Correct answer is: Monthly or as needed
Q.21 Which of the following is a limitation of management accounting?
Provides data for decision-making
Relies on estimates and forecasts
Helps in planning
Assists in controlling costs
Explanation - Management accounting relies on projections and estimates, which may sometimes be inaccurate.
Correct answer is: Relies on estimates and forecasts
Q.22 Which of the following describes 'financial control' in management accounting?
Recording past financial transactions
Monitoring and regulating resources to achieve goals
Preparing financial statements
Paying taxes on time
Explanation - Financial control involves checking and regulating resources to ensure organizational objectives are met.
Correct answer is: Monitoring and regulating resources to achieve goals
Q.23 Which of these is a responsibility of management accountants?
Preparing tax returns for the government
Providing insights for decision-making
Conducting audits for external parties
Issuing shares to the public
Explanation - Management accountants focus on analyzing and presenting information to support managerial decisions.
Correct answer is: Providing insights for decision-making
Q.24 Relevant cost is:
A past cost
A cost that changes with decisions
A fixed historical cost
Sunk cost
Explanation - Relevant costs are future costs that will be affected by a managerial decision.
Correct answer is: A cost that changes with decisions
Q.25 Management accounting primarily aids in:
External financial reporting
Internal decision-making and control
Tax compliance
Shareholder meetings
Explanation - Management accounting focuses on providing internal managers with information for planning, controlling, and decision-making.
Correct answer is: Internal decision-making and control