ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Batch 41 May 2021 CPA Licensure Examination Week No. 1
MANAGEMENT ADVISORY SERVICES A. Lee E. Arañas K. Manuel
MAS-01: MANAGEMENT ACCOUNTING VS. FINANCIAL MANAGEMENT
MANAGEMENT ACCOUNTING – the discipline of providing accounting information that is useful in making
managerial decisions about planning, organizing and controlling business operations.
BASIC MANAGEMENT FUNCTIONS
Planning involves:
PLANNING - setting immediate and long-term objectives.
- deciding which alternative is best suited to attain the set objectives.
Organizing involves:
ORGANIZING - deciding how to utilize available resources as plans are carried out.
- tackling activities necessary to achieve objectives such as staffing, subordinating,
directing and motivating.
Controlling involves:
CONTROLLING - comparing actual performance with set plans or standards.
- deciding what corrective actions to take should there be any deviation (variance)
between actual and planned performance.
Decision-making is an inherent function of management; all management functions would require a certain
level of decision-making, which makes management accounting information useful in all stages of management.
MANAGEMENT ACCOUNTING vs. FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING MANAGEMENT ACCOUNTING
1. User of information Primarily for external users Exclusively for internal users (management)
2. Guiding principles Generally Accepted Accounting Principle Management wants and needs
3. Optional/Mandatory Mandatory (especially for public entities) Discretionary or optional
4. Type of information Primarily monetary (financial) in nature Monetary and non-monetary
5. Emphasis of reports Reliability (precision of data) Relevance (timeliness of data)
6. Purpose/End result Financial reporting and compliance Management decision-making
7. Source of data From company’s (internal) info system From internal and external sources
8. Amount of detail Compressed and simplified Extensive and detailed
9. Focus of information Focus mainly on business as a whole Focus on segments and business as a whole
10. Frequency Periodic (annually, quarterly) As frequent as the need arises
11. Time orientation Mainly historical (past) data Future-oriented using current and past data
12. Unifying model Assets = Liabilities + Equity No unifying model or equation
COST accounting, while a separate discipline, is a subset of both management and financial accounting.
CONTROLLER – the company official responsible for the accounting aspect of management control. It is a title
given to a person holding the position of a chief management accounting executive. In many
business texts and literatures, the controller is often referred to as the ‘chief accountant.’
LINE FUNCTION vs. STAFF FUNCTION
LINE function - the authority to give command or orders to subordinates; it exercises direct downward
authority over line departments (e.g., VP for operations over operations manager).
STAFF function – the authority to advise but not to command others -- the function of providing line and
staff managers with specialized service and technical advice for support; it is exercised
laterally or upward.
The controller primarily exercises a staff function as the controller’s office gives advice and service to
other departments and to entire organization as a whole; however, in an accounting department headed
by the controller, the controller has a line authority over subordinates within the department.
CONTROLLER vs. TREASURER
To avoid incompatible duties being assigned to a single officer, a controller (recording function) must not
hold at the same time the position of a treasurer (custody function). Consider the following:
CONTROLLER TREASURER
1. Financial reporting 1. Provision of capital
2. Tax administration 2. Investor relations
3. Government Reporting 3. Short-term financing
4. Accounting Information System 4. Banking and custody
5. Cost and Management Accounting 5. Credit and collections
6. Financial Analysis and Special Studies 6. Investments
7. Protection of Assets and Economic Appraisal 7. Insurance
Page 1 of 4 0915-2303213 www.resacpareview.com
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY MAS-01
Week No. 1: MANAGEMENT ACCOUNTING vs. FINANCIAL MANAGEMENT
FINANCIAL MANAGEMENT – concerns the duties of the financial manager, who is responsible for making
significant corporate investment and financing decisions.
GOAL OF FINANCIAL MANAGEMENT
Modern managerial finance theory works under the premise that the primary goal of the firm is to maximize
shareholders’ wealth, rather than to maximize profit. The financial manager acts in the shareholders’ best
interests by making decisions that maximize the market value of the company stocks.
ROLE OF FINANCIAL MANAGERS
The role of a financial manager may include, but is not limited to, the following tasks:
1. Financial analysis and planning. Determining the proper amount of funds to employ in the firm
through liquidity and profitability analysis of the company’s financial statements. (related topics:
budgeting, financial statement analysis and additional funds needed)
2. Investment decisions. Selecting the best projects in which to invest firm resources, based on
consideration of risks and returns. (related topic: capital budgeting)
3. Financing and capital structure decisions. Outsourcing company funds (mix of debt and equity
financing) to support firm’s operations and investment programs. (related topic: costs of capital)
4. Management of financial resources. Managing the firm’s current assets and source of short-term
credit in the most efficient manner. (related topic: working capital management)
5. Risk management. Managing the firm’s exposure to all types of risk. (related topics: leverage, risks
and returns)
No single person is tasked for all the responsibilities of a financial manager. These tasks are dispersed
throughout the firm. In large firms, financial responsibilities are usually carried out by the treasurer and/or
the controller while the chief financial officer (CFO) usually oversees their work.
BASIC PRINCIPLES IN MANAGERIAL FINANCE
Most techniques and tools in finance are based on the following theoretical principles:
Risk-return trade-off: a company does not take additional risks unless it expects to be compensated
with additional returns.
Time value of money: a peso received today is worth more than a peso received in the future.
Cash – not profit – is king.
Incremental cash flows: it’s only what changes that counts.
Tax consideration: virtually all financial decisions are influenced by the effect of taxes.
Ethical behavior – doing the right thing – is always relevant.
MULTIPLE-CHOICE QUESTIONS
(Sources: CMA/CIA/RPCPA/AICPA/Various test banks)
1. Management accounting information is deemed most successful if it
a. Is accurate
b. Is easily understood by the user
c. Helps managers improve their decisions
d. Helps creditors evaluate the company’s ability to pay its debts
2. The primary purpose of management accounting is to provide information
a. To internal users c. To management and government
b. To external users d. To both internal and external users
3. Management accounting
a. Is discretionary rather than mandatory
b. Is concerned only with monetary information
c. Is governed by Generally Accepted Accounting Principles (GAAP)
d. Is focused on business as a whole rather than on segments of the business
4. Management accounting is similar to financial accounting in that
a. Both classify reported information in the same way
b. Both serve the needs of investors and creditors
c. Both concentrate with historical data
d. Both deal with economic events
5. Which of the statements is TRUE regarding managerial accounting?
a. It may use estimates and forecasts
b. It complies with external reportorial requirements
c. It is concerned with reporting to external users of accounting information
d. It involves cost accumulation procedures like job order costing, process costing, standard
costing, and activity-based costing (ABC)
6. Which of the following statements is TRUE?
a. Financial accounting is a subset of cost accounting
b. Management accounting is a subset of cost accounting
c. Management accounting is a subset of both cost and financial accounting
d. Cost accounting is a subset of both management and financial accounting
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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY MAS-01
Week No. 1: MANAGEMENT ACCOUNTING vs. FINANCIAL MANAGEMENT
7. For decision-making purposes, managers are more concerned with receiving information that is:
a. Completely accurate and precise
b. Completely objective and verifiable
c. Relevant, completely accurate and precise
d. Relevant, flexible and immediately available
8. Decision-making is required in which of the following management function(s)?
a. Planning c. Planning and organizing
b. Planning and control d. Planning, organizing and control
9. The setting of objectives and the identification of methods to achieve those objectives is called
a. Planning c. Decision making
b. Controlling d. Performance evaluation
10. The management function that involves overseeing day-to-day activities.
a. Planning c. Directing and motivating
b. Controlling d. Rationalizing and decision-making
11. What is the function of management that compares planned results against actual results?
a. Planning c. Organizing
b. Controlling d. Decision-making
12. The management control process contains the following four sequential steps, including
A) Measuring actual performance
B) Establishing standards of performance
C) Implementing a program of corrective action
D) Comparing actual performance with standards
What is the proper sequence of these activities?
a. A, B, C, D c. B, A, C, D
b. A, B, D, C d. B, A, D, C
13. The controller primarily occupies a
a. Line position
b. Staff position
c. Non-supervisory rank-and-file position
d. Position with very little influence in management decision-making
14. A STAFF position is
a. The primary function of a company’s treasurer
b. Exercised downward in doing the command function
c. Directly involved in achieving the basic objectives of the organization
d. Supportive in nature since it provides assistance to other company segments
15. Which of the following is most likely a LINE position?
a. VP for Research of a conglomerate firm
b. Store manager of a retail convenience outlet
c. Chief financial officer of a merchandising company
d. Human resources manager for an educational institution
16. CONTROLLERS are usually not concerned with
a. Preparation of tax returns c. Protection of assets
b. Reporting to government d. Investor relations
17. TREASURERS are usually not concerned with
a. Financial reporting c. Cash custody and banking
b. Short-term financing d. Credit extension and bad debt collection
18. The primary goal of financial management is to:
a. To minimize the risk c. To maximize profit
b. To maximize the return d. To maximize shareholders' wealth
19. Financial management is mainly concerned with:
a. Profit maximization
b. Arrangement of funds
c. Efficient management of every business
d. All aspects of acquiring and utilizing financial resources for the firm’s activities
20. Which of the following is NOT a function of financial management?
a. Financing c. Capital budgeting
b. Internal control d. Risk management
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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY MAS-01
Week No. 1: MANAGEMENT ACCOUNTING vs. FINANCIAL MANAGEMENT
MANAGEMENT ADVISORY SERVICES (MAS)
• One of the six CPA board exam subjects (other subjects: AFAR, AUD, FAR, RFBT & TAX)
• Possible Date & Time: 16 May 2021, Sunday, 8 AM – 11 AM
• Number of items: 70 multiple-choice questions (MCQs), mix of theories and problems
• Topics covered (based on CPA Syllabus effective May 2019):
Part I – MANAGEMENT ACCOUNTING (43% - 30 out of 70 items)
ü Cost Concepts and Behavior
ü Cost-Volume-Profit Analysis
ü Standard Costing & Variance Analysis
ü Variable Costing & Absorption Costing
ü Financial Planning & Budgets
ü Activity-Based Costing & Activity-Based Management
ü Strategic Cost Management
ü Responsibility Accounting
ü Balanced Scorecard
ü Quantitative Techniques
ü Relevant Costing & Differential Analysis
Part II – FINANCIAL MANAGEMENT (40% - 28 out of 70 items)
ü Financial Statement Analysis
ü Working Capital Management & Finance
ü Capital Budgeting
ü Risks and Returns
ü Capital Structure & Long-Term Financing Decision
Parts III, IV & V – “THE OTHERS” (17% - 12 out of 70 items)
ü Macroeconomics
ü Microeconomics
ü Management Consultancy
ü Project Feasibility Studies
ü Ethical Considerations, among others
• Majority of the topics under MAS are also covered in the CMA Exams:
CMA Part I – Financial Planning, Performance, and Analytics
(3 hours for 100 MCQs and 1 hour for the Essay portion)
ü External Financial Reporting Decisions (15%)
ü Planning, Budgeting & Forecasting (20%)
ü Performance Management (20%)
ü Cost Management (15%)
ü Internal Controls (15%)
ü Technology and Analytics (15%)
CMA Part II – Strategic Financial Management
(3 hours for 100 MCQs and 1 hour for the Essay portion)
ü Financial Statement Analysis (20%)
ü Corporate Finance (20%)
ü Decision Analysis (25%)
ü Risk Management (10%)
ü Investment Decisions (10%)
ü Professional Ethics (15%)
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