• Financial accounting is designed to supply information in the form of profit and loss account and balance sheet to external parties like shareholders, creditors, banks and investors while. Management Accounting is designed principally for providing accounting information for internal use of the management. Thus, financial accounting is primarily an external reporting process while management accounting is primarily an internal reporting process.
• In financial accounting only such economic events find place, which can be described in money. However, the management is equally interested in non-monetary economic events, viz., technical innovations, personnel in the organization, changes in the value of money, etc. These events affect management's decision and, therefore, management accounting cannot afford to ignore them.
• Financial accounting portrays the position of business as a whole. The financial statements like income statement and balance sheet report on overall performance or statues of the business while management accounting directs its attention to the various divisions, departments of the business and reports about the profitability, performance, etc., of each of them. Financial accounting cannot reveal what part of the management action is going wrong and why. Management accounting provides detailed analytical data for these purposes.
• Financial accounting is concerned with the monetary record of past events while Management accounting is accounting for future and, therefore, it supplies data both for present and future duly analyzed in detail in the 'management language' so that it becomes a base for management action.
• The period of reporting is much longer in financial accounting as compared to management accounting.
• Financial accounting is more objective while management accounting is more subjective. This is because management accounting is fundamentally based on judgment rather than on measurement
• There is less emphasis on precision in case of management accounting as compared to financial accounting since the information is meant for internal consumption.
skilled writter answered the question on April 24, 2018 at 18:42
-
Outline four contents of a letter of representation
(Solved)
Outline four contents of a letter of representation.
Date posted:
April 14, 2018
.
Answers (1)
-
a) Explain the following terms as used in auditing: (i) Audit risk. (ii) Inherent risk. (iii) Control risk. (iv) Detection risk.
(Solved)
(a) Explain the following terms as used in auditing:(i) Audit risk. (ii) Inherent risk. (iii) Control risk. iv) Detection risk.
Date posted:
April 14, 2018
.
Answers (1)
-
(a) Define the term recurring audit (b) State the circumstance under which the auditor may send a new engagement letter to the existing ...
(Solved)
(a) Define the term recurring audit (b) State the circumstance under which the auditor may send a new engagement letter to the existing ...
Date posted:
April 14, 2018
.
Answers (1)
-
Explain the procedures an auditor should follow before and after accepting nomination.
(Solved)
Explain the procedures an auditor should follow before and after accepting nomination.
Date posted:
April 10, 2018
.
Answers (1)
-
Why would a company not share all its profits to shareholders?
(Solved)
Why would a company not share all its profits to shareholders?
Date posted:
March 30, 2018
.
Answers (1)
-
(a) Explain why auditors carry out circularisation of debtors. (b) Distinguish between positive and negative debtors circularisation procedures. (c) Describe in...
(Solved)
(a) Explain why auditors carry out circularisation of debtors.
(b) Distinguish between „positive? and „negative? debtors circularisation procedures.
(c) Describe in detail the work you would carry out in scrutinizing the replies to the debtors circularisation and in confirming whether the debtors balances are collectable in the following situations:
i. where the debtor does not agree with the balance and states a difference; (6 marks)
ii. where the debtor reports that he cannot confirm the balance
iii. where no reply is received from the debtor
Date posted:
March 28, 2018
.
Answers (1)
-
John Mutiso bought shares of Sh.2 million six months ago in Kenya Company Limited which has since gone into liquidation. He intends to sue...
(Solved)
John Mutiso bought shares of Sh.2 million six months ago in Kenya Company Limited which has since gone into liquidation. He intends to sue XYZ & Co. Certified Public Accountants for the imminent loss of Sh. 2 million which he is likely to suffer. XYZ & Co. had audited the Kenya Company Ltd. The previous year and issued an unqualified report. John Mutiso claims that he solely relied on the audit report when he took that investment decision.
Required:
a) Do the auditors, XYZ & Co. have any liability to Mr. John Mutiso?
b) What circumstances must Mr. John Mutiso demonstrate if he has to succeed against the auditors?
c) State the measures XYZ & Co. should undertake to minimize potential liability for professional negligence.
Date posted:
March 28, 2018
.
Answers (1)
-
Distinguish between Accrual concept and Prudence concept
(Solved)
Distinguish between Accrual concept and Prudence concept.
Date posted:
March 23, 2018
.
Answers (1)
-
The auditing guideline on ‘recording’ requires audit working papers to be sufficient complete and detailed so that an experienced auditor who has no previous connection...
(Solved)
The auditing guideline on ‘recording’ requires audit working papers to be sufficient complete and detailed so that an experienced auditor who has no previous connection with the audit is able to subsequently ascertain from working papers the work performed and to further support the conclusions reached thereon.
Required:
(a) State four benefits that the auditor will obtain from the working papers that meet the above requirements.
(b) Outline the contents of a typical:
(i) Current audit file;
(ii) Permanent audit file.
Date posted:
March 22, 2018
.
Answers (1)
-
Give four examples of internal audit work that may be used by the external auditor
(Solved)
Give four examples of internal audit work that may be used by the external auditor
Date posted:
March 22, 2018
.
Answers (1)
-
Explain the matters you would consider and the work you would perform to enable you assess the extent to which you would rely on the...
(Solved)
Explain the matters you would consider and the work you would perform to enable you assess the extent to which you would rely on the work of the internal audit department of your client
Date posted:
March 22, 2018
.
Answers (1)
-
Distinguish between internal audit and internal check ...
(Solved)
Distinguish between internal audit and internal check
Date posted:
March 22, 2018
.
Answers (1)
-
What are the similarities between internal and external audits?
(Solved)
What are the similarities between internal and external audits?
Date posted:
March 22, 2018
.
Answers (1)
-
In addition to shareholders, many different parties are interested in the audited accounts of a company. Name FOUR such parties and state the significance...
(Solved)
In addition to shareholders, many different parties are interested in the audited accounts of a company. Name FOUR such parties and state the significance of audited accounts to each one of them.
Date posted:
March 22, 2018
.
Answers (1)
-
Discuss the 4 main methods of determining depreciation
(Solved)
Discuss the 4 main methods of determining depreciation.
Date posted:
March 22, 2018
.
Answers (1)
-
(a) Define control accounts (b) State the two main types of control accounts (c) State the purpose of control account
(Solved)
(a) Define control accounts (b) State the two main types of control accounts (c) State the purpose of control account
Date posted:
March 21, 2018
.
Answers (1)
-
“Action must be specifically taken to prevent the occurrence of frauds involving the assets of the company”, Finance Director of Food All Limited addressing accounting...
(Solved)
“Action must be specifically taken to prevent the occurrence of frauds involving the assets of the company”, Finance Director of Food All Limited addressing accounting staff of the company. Of particular interest to the directors are:
1. The safety of unclaimed wages
2. The receipt of cash from customers.
3. The company’s cheque books
4. Issue of credit notes to debtors.
Required:
a. For each of the above, explain how a fraud can occur in the area.
b. What controls should be in place to prevent the occurrence of each of the frauds described in (a) above?
Date posted:
March 16, 2018
.
Answers (1)
-
The Companies Act (Cap.486) sets out the duties of the auditors for a company in respect of his report and other matters.
Required:
a. State four situations under...
(Solved)
The Companies Act (Cap.486) sets out the duties of the auditors for a company in respect of his report and other matters.
Required:
a. State four situations under which the Act requires auditors to qualify their report.
b. State two circumstances in which the auditors may qualify their report owing to inherent uncertainty.
c. State four types of circumstances in which the auditors may qualify their report as a result of disagreement with the directors
Date posted:
March 16, 2018
.
Answers (1)
-
The principle objective of the verification of liabilities, commitments and contingencies is to form an opinion as to their completeness, existence, valuation and presentation in...
(Solved)
The principle objective of the verification of liabilities, commitments and contingencies is to form an opinion as to their completeness, existence, valuation and presentation in the financial statements.
Required:
a. Why does the auditor examine statements received from suppliers of goods and services?
b. How would the auditor ensure that at the year end all goods received by a client were included in both inventories and creditor balances?
c. How would the auditor ensure that the amounts accrued for wages and salaries due but unpaid were properly calculated and recorded in the books?
d. What tests would the auditor need to undertake in order to ensure that capital commitments at the year end were fairly stated in the books?
Date posted:
March 16, 2018
.
Answers (1)
-
The auditing guideline on ‘planning, controlling and recording’ contains the following statement with regard to working papers: ‘audit working papers should always be sufficiently complete...
(Solved)
The auditing guideline on ‘planning, controlling and recording’ contains the following statement with regard to working papers: ‘audit working papers should always be sufficiently complete and detailed to enable an experience auditor with no previous connection with the audit subsequently to ascertain from them what work was performed and to support the conclusions reached.’
Required:
a) Describe four benefits that the auditor will obtain from working papers that meet the above requirement.
b) If the auditor has discovered that a claim for damages is a significant item requiring exercise of judgement in the financial statements, show what type of evidence on the matter the auditor must record in the current file. Give reasons for the inclusion of such evidence in the current file.
c) List three types of information which is normally retained in the audit file and state why such information should be available for reference in the course of an audit.
d) Comment on the desirability of using standardised working papers and give an example of such working paper and its use.
Date posted:
March 16, 2018
.
Answers (1)