Introduction to cost and management accounting MCQs

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Cost accounting is a system for recording data and producing information about costs for the products produced by an organization and/or the services
Introduction to cost and management accounting MCQs

Introduction to cost and management accounting MCQs

Cost accounting is a system for recording data and producing information about costs for the products produced by an organization and/or the services it provides. Whereas, the purpose of management accounting is to provide information for Planning, Control and Decision making. Here on MCQs.club we have designed simple and easy Multiple-Choice Questions (MCQs) on Introduction to cost and management accounting. These MCQs are useful for accountancy students and competitive exams.

1. Financial accounting involves recording the financial transactions of an organization and summarizing the periodic financial statements for external users who wish to analyze and interpret the financial position of the organization.

A. The above statement is false
B. The above statement is true

2. The main duties of the financial accountant include:

A. Maintaining the bookkeeping system
B. Accounts payable/Receivable control account
C. Prepare Financial Statements
D. All of the above

3. Information produced by the financial accounting system is usually insufficient for the needs of management.

A. The above statement is false
B. The above statement is true

4. Managers usually want to know about the costs of individual products and services and the profits made by individual products and services. Such information is provided by cost accounting and management accounting systems.

A. The above statement is true
B. The above statement is false

5. Cost accounting is a system for recording data and producing information about costs for the products produced by an organization and/or the services it provides.

A. The above statement is true
B. The above statement is false

6. Which of the following statement is correct?

A. Cost accounting involves a careful evaluation of the resources
B. The techniques employed in cost accounting are designed to provide financial information about the performance of the organization.
C. The terms ‘cost accounting’ and ‘management accounting’ are often used to mean the same thing.
D. All of the above are correct

7. Managers need information of a non-financial nature:

A. At a strategic level
B. At a tactical level
C. At an operational level
D. All of the above

8. At strategic level managers need information:

A. About developments in their markets and in the economic situation
B. About new technologies
C. About the activities of competitors
D. All of the above

9. At tactical level managers need information:

A. About issues such as products or service quality, customer queries/satisfaction
B. About employee skills levels and employee morale
C. Both A&B
D. None

10. At an operational level manager may need information:

A. About the number of rejects per machine
B. About the lead time for delivering materials
C. Labor and machine hours available
D. All of the above

11. In Cost Accounting there may be a formal costing system in which data about operational activities is recorded in a ‘double entry’ system of cost accounts in a ‘cost ledger’.

A. The above statement is true
B. The above statement is false

12. The cost accounting data is captured, stored and subsequently analyzed to provide management information about costs.

A. The above statement is false
B. The above statement is true

13. Cost accounting information is historical in nature, and provides information about the actual costs of items and activities that have been incurred.

A. The above statement is true
B. The above statement is false

14. Management accounting is concerned with providing information to management that can be used to help run the business.

I. The purpose of management accounting is to provide detailed financial information to management, so that they can plan and control the activities or operations for which they are responsible.
II. Management accounting information is also provided to help managers make other decisions. Management accounting provides management information to assist with planning, control and ‘one-off’ decisions.

Which of the above statement is correct?

A. Only (I) is correct
B. Only (II) is correct
C. Both (I) and (II) are correct
D. None

15. Management accounting includes cost accounting as one of its disciplines but is wider in scope. Management accounting information is often prepared from an analysis of cost accounting data, although cost estimates and revenue estimates may be obtained from sources other than the cost accounting system.

A. The above statement is false
B. The above statement is true

16. Financial accounting is concerned with providing information about the financial performance and cash flows of an entity in a given period and the financial position of the entity at the end of that period.

A. The above statement is true
B. The above statement is false

17. Managers might use the information in the financial statements, but the main purpose of financial reporting is for ‘external purposes’ rather than to provide management information.

A. The above statement is false
B. The above statement is true

18. A cost accounting system records the costs and revenues for:

A. Individual jobs
B. Processes, activities
C. Products or services
D. All of the above

19. Like the financial accounting system, a cost accounting system is based on a double entry system of debits and credits.

A. True
B. False

20. A factory ledger is a group of accounts, containing the production costs of a business. These accounts typically include the following:

A. Direct material expenses
B. Direct labour expenses
C. Factory overhead expense
D. All of the above

21. The data used to prepare financial accounts and management accounts are the same. The differences between the financial accounts and the management accounts arise because the data is analyzed differently.

A. True
B. False

22. Which of the following statements about management accounts is/are true?

I. There is a legal requirement to prepare management accounts.
II. The format of management accounts is largely determined by law.
III. They serve as a future planning tool and are not used as a historical record.

A. (i) and (ii)
B. (ii) and (iii)
C. (iii) only
D. None of the statements are correct.

23. Cost accounting is the ‘gathering of cost information and its attachment to cost objects, the establishment of budgets, standard costs and actual costs of operations, processes, activities or products; and the analysis of variances, profitability or the social use of funds.’

A. The above definition is incorrect
B. The above definition is correct

24. Management accounting is the ‘application of the principles of accounting and financial management to create, protect, preserve and increase value for the shareholders of for-profit and not-for-profit enterprises in the public and private sectors.’

A. The above definition is correct
B. The above definition is incorrect

25. Cost accounting information is, in general, unsuitable for decision making.

A. False
B. True

26. The term “Accounting” maybe defined as:

A. The systematic and comprehensive recording of financial transactions pertaining to a business and the process of summarizing, analyzing and reporting these transactions.
B. A systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information.
C. The process of identifying, measuring, and communicating economic information to permit informed judgement and decisions by users of the information
D. All of the above

27. Which if the following is the purpose(s) of accounting?

A. To provide a record of the financial value of business transactions, and in doing so to establish financial controls and reduce the risks of fraud
B. To assist with the management of the financial affairs of an entity
C. To provide information – mainly information of a financial nature.
D. All of the above

28. Accounting information is provided for:

A. Management, so that managers have the information they need to run the company
B. Other users of information, for example, a company produces accounting information for its shareholders, also used by tax authorities, investors, trade union representatives and others.
C. Both A&B
D. None

29. Cost and management accounting is concerned with the provision of _______________for management.

A. Recording, measuring of costs
B. Information, mainly of a financial nature,
C. Identifying costs
D. None

30. For Cost Accounting purposes “Data” is a term that refers to____________.

A. Facts
B. Events
C. Transactions
D. All of above

31. Cost and Management accounting Information is derived from _________ that have been processed, structured and analyzed.

A. Summaries
B. Facts
C. Cost units
D. None

32. Information is sometimes referred to as:

A. Processed data
B. Data
C. Raw data
D. None

33. Which of the following statement is correct?

A. Data consists of unprocessed facts and statistics
B. Data is collected and processed to produce information
C. Data has no meaning until it has been processed into information
D. All of the above are correct

34. The sources of cost accounting data within an organization include:

A. Invoices, receipts
B. Inventory records and time sheets
C. Both A&B
D. None

35. Data is analyzed and processed to produce management information, often in the form of:

A. Routine reports
B. Specially-prepared reports
C. Answers to ‘one-off’ enquiries that are input to a computer system
D. All of the above

36. Information produced from cost accounting data is management accounting information.

A. The above statement is true
B. The above statement is False

37. Management accounting systems also obtain information from other sources, including external sources, but the cost accounting system is a major source of management accounting information.

A. The above statement is true
B. The above statement is false

38. Management accounting Information is only useful to managers if it possesses certain qualities or attributes, Information should be:

A. Accurate, Understandable, Reliable
B. Sufficiently complete, Communicated to the right person
C. Comparable, cost effective, provided within time
D. All of the above

39. Which of the following statement is correct?

A. Information should be fair and free from bias. It should not have any arithmetical and grammatical errors.
B. Accounting information must be set out clearly and be properly explained.
C. Unless information has a purpose, it has no value at all and it makes no sense to provide it.
D. All of the above are correct

40. Which of the following is correct with regards to reliability of information?

A. Users of information must be able to rely on it for its intended purpose.
B. Unreliable information is not useful.
C. Information does not have to be 100% accurate to be reliable. In many cases, information might be provided in the form of an estimate or forecast.
D. All of the above are correct

41. Which of the following information is correct with regards to cost effectiveness of information?

A. Management information has a value (if information has no value there is no point in having it) but obtaining it involves a cost
B. The value of information comes from improving the quality of management decisions
C. Information is worth having only if it helps to improve management decisions, and the benefits from those decisions exceed the cost of providing the additional information
D. All of the above are correct

42. Most organizations require the following types of information.

A. Financial
B. Non-financial
C. A combination of financial and non-financial information
D. All of the above

43. The purpose of management accounting is to provide information for:

A. Planning
B. Control
C. Decision making
D. All of the above

44. Management accounting provides information for planning. Planning involves:

A. Setting the objectives for the organization
B. Making plans for achieving those objectives
C. Both A&B
D. None

45. Control of the performance of an organization is an important management task. Control involves the following:

A. Monitoring actual performance, and comparing actual performance with the objective or plan
B. Taking corrective action where appropriate
C. Evaluating actual performance
D. All of the above

46. Planning can be done at different levels in an organization:

I. At Strategic level
II. At Managerial Level
III. Operational Level

Which of the above is true?

A. Only (I) and (II)
B. Only (I)
C. (II) and (III) are true
D. All of the above are true

47. At a Strategic level planning is:

A. Long-term, carried out by the highest level of the organization
B. Short to medium-term planning
C. For day-to-day operations
D. None

48. At a Managerial level planning is:

A. Long-term
B. Short to medium-term, carried out by the middle level management
C. For day-to-day operations
D. None

49. At an Operational level planning is:

A. Long-term
B. Short to medium-term
C. Short-term planning for day-to-day operations
D. None

50. Many measures can be used to measure performance within an organization, common performance measurements are:

A. Variances
B. Profitability measures
C. Return measures
D. All of the above

51. The objectives of an organization might include one or more of the following.

A. Maximize profits, Maximize revenue
B. Maximize shareholder value, Increase market share
C. Minimize costs
D. All of above

52. Strategic planning is the process of deciding on:

I. objectives of the organization, on changes in these objectives,
II. on the resources used to attain these objectives,
III. on the policies that are to govern the acquisition, use and disposition of these resources.

Identify whether the above is correct.

A. The above statement is incorrect
B. The above statement is correct

53. Tactical (or management) control is the process by which managers assure that resources are obtained and used effectively and efficiently in the accomplishment of the organization’s objectives.

A. True
B. False

54. Operational control is the process of assuring that specific tasks are carried out effectively and efficiently.

A. False
B. True

55. A management control system is a system which measures and corrects the performance of activities of subordinates in order to make sure that the objectives of an organization are being met and the plans devised to attain them are being carried out.

A. True
B. False

56. The basic elements of a management control system are:

A. Carrying out the plan and measuring actual results achieved
B. Comparing actual results against the plans
C. Evaluating the comparison, and deciding whether further action is necessary
D. All of the above

57. Identify the features of Strategic information:

I. It is derived from both internal and external sources.
II. It is summarized at a high level.
III. It is relevant to the long term.
IV. It deals with the whole organization (although it might go into some detail).
V. It is often prepared on an ‘ad hoc’ basis.
VI. It is both quantitative and qualitative.
VII. It cannot provide complete certainty, given that the future cannot be predicted.

Which of the following features describe Strategic information?

A. Only (II) (III) (IV)
B. Only (III)
C. Only (I) and (III)
D. All of the above

58. Tactical information (used by middle management) includes:

A. productivity measurements (output per man hour or per machine hour)
B. budgetary control or variance analysis reports
C. cash flow forecasts
D. All of the above

59. Identify the features of Tactical information:

I. It is primarily generated internally
II. It is summarized at a lower level
III. It is relevant to the short and medium term
IV. It describes or analyses activities or departments
V. It is prepared routinely and regularly
VI. It is based on quantitative measures.

Which of the following features describe Tactical information?

A. (II) (III) Only
B. (I) (V) Only
C. (III) Only
D. All of the above

60. Operational information (used by front-line managers) includes:

I. It is derived almost entirely from internal sources
II. It is highly detailed, being the processing of raw data
III. It relates to the immediate term, and is prepared constantly, or very frequently
IV. It is task-specific and largely quantitative.

Which of the following features describe Operational information?

A. Only (III)
B. (I) and (IV) Only
C. All of the above
D. None

61. For management accounting purposes information may come from:

A. Internal Sources
B. External Sources
C. Both A&B
D. None

62. Internal Sources of information may include:

A. Accounting system
B. Payroll system
C. Strategic planning system
D. All of the above

63. The strategic planning system provide information relating to the organization’s objectives and targets. Details of the organization’s capital investment program and product launch program may also be recorded here.

A. The above statement is false
B. The above statement is true

64. Benefits of internal sources of information includes:

A. Readily available data
B. Data can easily be sorted and analyzed
C. Reports can easily be produced when required
D. All of the above

65. Businesses can rely only on internal information ignoring the external environment which will influence their activities.

A. The above statement is false
B. The above statement is true

66. The role of the management accountant in collection of data from outside, as well as from inside, the organization and used in the decision-making process is termed as:

A. Environmental scanning
B. Environmental monitoring
C. Both A&B
D. None

67. The main sources of external information may include:

A. Government sources
B. Business contacts
C. Trade associations/journals
D. All of the above

68. Customers can provide information on such matters as:

I. The product specification/quality which they require
II. Requirement for delivery periods
III. Preference for packaging and distribution methods

Which of the above is correct?

A. (I) and (III) are correct
B. (II) and (III) are correct
C. All of the above are correct
D. Customers do not provide information

69. Suppliers may be able to provide information on:

I. Quantity discounts and volume rebates which may help the organization to decide on order size
II. Availability of products and services
III. Alternative products or services which may be available
IV. Technical specifications of their product

Which of the above is correct?

A. All of the above are correct
B. (I), (III) and (IV) are correct
C. (I) and (IV) are correct
D. None

70. Data may be classified as:

A. Primary and secondary data
B. Discrete and continuous data
C. Sample and population data
D. All of the above

71. Primary data are data collected especially for a specific purpose. Raw data are primary data which have not been processed at all, and which are still just a list of numbers.

A. True
B. False

72. Secondary data are data which have already been collected elsewhere, for some other purpose, but which can be used or adapted for the survey being conducted.

A. False
B. True

73. Quantitative (measurable) data may be classified as being:

A. Discrete
B. Continuous
C. Primary or Secondary
D. Both A&B only

74. Discrete data are data which can only take on a finite or countable number of values within a given range.

A. True
B. False

75. Continuous data are data which can take on any value. They are measured rather than counted.

A. False
B. True

76. The main sources of secondary data are:

A. Governments, banks, newspapers
B. trade journals, information bureau, consultancies
C. libraries, information services
D. All of the above

77. Which of the following statements is/are true for Secondary data?

I. They are cheaply available
II. Since the investigator did not collect the data, they are therefore unaware of any inadequacies or limitations of the data

A. Both (I) and (II) correct
B. Only (I) is correct
C. Only (II) is correct
D. None

78. The purpose of sampling is to gain as much information as possible about the population by observing _____________ of that population.

A. Only a small proportion
B. Maximum proportion
C. More than 90%
D. None

79. For the purposes of sampling the term ‘population’ is used to mean all the items under consideration in a particular enquiry.

A. The above statement is false
B. The above statement is true

80. The characteristics of a population can be ascertained by investigating only a sample of that population provided that certain rules are observed:

I. The sample must be of a certain size.
II. The sample must be chosen in such a way that it is representative of the population.

Which of the above is true?

A. Only (I) is true
B. Only (II) is true
C. Both (I) and (II) are true
D. None

81. Which of the following are sampling methods used?

A. Random sampling, Systematic sampling,
B. Stratified sampling, Multi-stage sampling
C. Cluster sampling, Quota sampling
D. All of the above

82. Which of the following is true for Random sampling?

A. This method is often applied if the population is particularly large
B. A technique which aims to ensure that each member of the population has an equal chance of being selected.
C. The population under consideration contains several well-defined groups (strata or layers)
D. None

83. Random sampling method has obvious limitations when either the population is extremely large or, not known.

A. The above statement is true
B. The above statement is false

84. If the population is known to contain (e.g. 50,000) items and a sample of size 500 is required, then 1 in every 100 items is selected. The first item is determined by choosing randomly a number between 1 and 100 e.g. 57, then the second item will be the 157, third 257… up to 49,957.

The above method is known as:

A. Random sampling
B. Systematic sampling
C. Stratified sampling
D. Cluster sampling

85. Identify the sampling method by reading the following step process:

Step-I: The country is divided into areas and a random sample of area is taken.
Step-II: Each area chosen in step 1 is then subdivided into towns and cities and a random sample of these is taken.
Step-III: Each town or city chosen in step 2 is further divided into roads and a random sample of road is then taken.
Step-IV From each road chosen in step 3 a random sample of houses is taken and the occupiers interviewed.

A. Its Cluster sampling
B. Its Random sampling
C. Its Multi-stage sampling
D. Its Quota sampling

86. The objective of a sample is to collect data upon which an opinion can be formed, and a conclusion drawn in respect of the population of which the sample is representative.

A. The above statement is true
B. The above statement is false

87. All the sampling techniques used, are concerned with _____________ whilst maintain the representative nature of the sample compared to the population.

A. Sample size
B. Minimizing costs
C. Avoiding every item counting
D. None

88. Advantages of a sample is/are:

A. It can be shown mathematically that once a certain sample size has been reached, very little accuracy is gained by examining more items. The larger the size of the sample, however, the more accurate the results.
B. It is possible to ask more questions with a sample.
C. Both A&B
D. None

89. A probability sampling method is a sampling method in which there is a known chance of each member of the population appearing in the sample.

A. True
B. False

90. Which of the following is/are Probability sampling methods?

A. Random sampling, Stratified random sampling
B. Systematic sampling
C. Multistage sampling, Cluster sampling
D. All of the above

91. Identify the drawbacks of random sampling:

I. Selected items are subject to the full range of variation inherent in the population.
II. An unrepresentative sample may result.
III. An adequate sampling frame might not exist.
IV. The numbering of the population might be laborious.
V. It might be difficult to obtain the data if the selected items cover a wide area.
VI. It might be costly to obtain the data if the selected items cover a wide area.

A. All of the above
B. (II) (V) and (VI) only
C. (I) and (VI) only
D. None

92. Stratified random sampling is a method of sampling which involves dividing the population into strata or categories. Random samples are then taken from each stratum or category.

A. True
B. False

93. Advantages of Multi-stage sampling is/are:

A. Fewer investigators are needed
B. It is not so costly to obtain a sample.
C. Both A&B
D. None

94. Which of the following are disadvantages of systematic sampling?

A. The sample chosen might be biased.
B. Some samples have a zero chance of being selected so the sampling method is not completely random.
C. Prior knowledge of each item in the population is required.
D. Only A&B

95. A non-probability sampling method is a sampling method in which the chance of each member of the population appearing in the sample is not known.

A. False
B. True

96. An Example of non-probability sampling is:

A. Random sampling
B. Quota sampling
C. Systematic sampling
D. All of the above

97. Advantages of quota sampling is/are:

A. It is cheap and administratively easy.
B. A much larger sample can be studied
C. No sampling frame is necessary
D. All of above

 

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