Question

Discussion Questions 1. What are the major differences between managerial accounting and financial accounting? 2. a. Differentiate between a department with line responsibility and a department with staff re- sponsibility. b. In an organization that has a Sales Department and a Personnel Department, among others, which of the two departments has (1) line re- sponsibility and (2) staff responsibility? 3. What manufacturing cost term is used to describe the cost of materials that are an integral part of the manufactured end product? 4. Distinguish between prime costs and conversion costs. 5. What is the difference between a product cost and a period cost?

Answer 1

As the question contains a lot of questions, elaboration is not provided just an overlook about the same is provided,

1. The main difference between these is, management accounting provides information for the internal managerial use for decision making process, whereas financial accounting provides information for the use of general public who are interested in the company that is who are intended to do business with the company. Financial accounting is mandated by statute whereas management accounting is optional at the part of the management. Financial accounting provides only objective financial information whereas management accounting provides both financial and non financial information.

2. a) Line department has the direct and formal control on the operations of the organisation where as staff department is aligned with specific responsibilities to each staff and have control on only those specific function in an organisations.

   
   b)Sales department has the line responsibilities in the organisation where as personal department handles a variety of critical problems of staff process owners etc so it is a staff responsibility.

3. The manufacturing cost term used is direct material cost.

4. Prime cost consist of direct material cost and direct labour cost where as conversion cost consist of direct labour cost and factory overheard cost.

5. Production cost consist of manufacturing cost i.e direct material, direct labour and factory overheard where as period cost consist of selling and administrative expenses.