CHAPTER 4: INTERNAL MANAGEMENT REPORTS

I. IDENTIFICATION

1. If a manager is held responsible not only for profit results but also for the investment
required to produce the margin or profit.
 Investment Center
2. Also known as a sales analysis report, is a document that summarizes a business’s sales
activities.
 Sales Report
3. Defined as the type of report that documents the expenses incurred by the business or by
the business’s employees and can be maintained every month, quarterly basis, or on an
annual basis.
 Expense Report
4. A collection of information about the current status of a project.
 Status Report
5. It describe and provide a high level of information to the reader.
 Margin Report
6. If the supervisor held accountable for a stipulated profit contribution. Sales office,
subsidiary, or division might be a profit center.
 Profit Center
7. The use of standard cost will reveal accurate margin information , as long as the standard
cost are routinely compared to actual cost and adjusted to yield a close approximation to
them.
 Standard Cost
8. Is a financial statement that sums up the amount of cash that enters and leaves an
organization.
 Cash Report
9. Is the process of estimating the flow of cash in and out of a business over a specific
period of time.
 Cash Forecasting
10. Is a financial metric calculated as the difference between current assets and current
liabilities.
 Working Capital

11. ________________ include cash, accounts receivable and inventory.

  Current Assets
12. ________________ include accounts payable, taxes, wages and interest owed.
 Current Liabilities
13. It can also be used in the service industry, with the chargeable hours of individual
employees or departments being substituted for machines.
 Capacity Planning Report
14. It refers to the manufacturing and production capabilities that are being utilized by a
nation or enterprise at any given time.
 Capacity Utilization
15. If the supervisor is held responsible for costs only.
 Cost Centre
16. ____________ is important for monitoring business performance over time. It lets the
corporation to make better business decisions, forecast future outcomes, and promote
continuous development.
 Reporting
17. A ________________ is a document that employers use to verify their tax liabilities or
cross-check financial data. It may include such information as pay rates, hours worked,
overtime accrued, taxes withheld from wages, employer tax contributions, vacation
balances and more.
 Payroll Report
18. The largest expense item in many organizations is _________, which exceeds even the
cost of materials.
 Payroll
19. This format is more rarely used, since it is designed specifically to reveal market share
information.
 Bubble Chart
20. It is very useful for pattern analysis, since a large number of data points can be entered
into the graph, and then fitted with a trend line that is a “best fit” based on the positions
of all data items.
 Scattergraph
21. Most people comprehend this style of presentation better than a straightforward
numerical report structure, so it is advisable to provide this type of information
aesthetically.
 Show Trends
22. A rule for standardization that entails the controller determining and adhering to the
appropriate report format for the receiver.
 Standardized Reports
23. It is a rule wherein the controller must be satisfied that the information supplied is
accurate enough to meet the purpose of each report.
 Issue Accurate Reports
24. This rule is important so that a reader does not need to call the accounting department to
request an explanation, reports should have a clear and uncomplicated layout.
 Keep Reports Simple And Clear
 25. To avoid this issue, the controller could provide a brief paragraph at the beginning of a
report, or an executive summary, that clearly identifies the important topics that the
reader should consider.
 Include Commentary

II. MULTIPLE CHOICE

1. This graph is shown in a three-dimensional format, and also can be presented in a two-
dimensional layout (especially when there is more information to pack into the chart).
A. Bar chart
B. Pie chart
C. Bubble chart
D. Area chart
2. It is heavily used to reveal patterns that occur over time, such as expense levels over
multiple periods.
A. Scattergraph
B. Bubble chart
C. Trendline
D. Area chart
3. It is very useful for pattern analysis, since a large number of data points can be entered
into the graph, and then fitted with a trend line that is a “best fit” based on the positions
of all data items.
A. Scattergraph
B. Bubble chart
C. Trendline
D. Area chart
4. Also in three-dimensional format. It can be used to compare the amount of a similar item
for different entities and also can be used for a limited amount of trend line analysis.
A. Bar chart
B. Pie chart
C. Bubble chart
D. Area chart
5. It resembles a bar chart, in that data can be stacked on top of each other, while also
presenting the stacked information over a series of time periods, as is done by a trend
line.
A. Area chart
B. Bubble chart
C. Pie chart
D. Bar chart
6. This format is more rarely used, since it is designed specifically to reveal market share
information.
A. Area chart
 B. Bubble chart
C. Pie chart
D. Bar chart
7. Report on unusual income and expenditures. The responsible manager lacks the time to
follow up on every detail due to the high volume of activity in any one department.
A. Rules of reporting
B. Rules Only By Exception
C. Report Only By Responsibility Area
D. Report Only When Needed
8. Even if the accounting staff is providing accurate information, too many reports may still
be too much for the recipient to handle.
A. Rules of reporting
B. Rules only by exception
C. Report only by responsibility area
D. Report only when needed
9. A reader only wants to see information that directly affects them. To ensure that reports
only include revenue, margin, cost, and other data specific to each person’s area of
responsibility, the controller must segment information. As a result, the reader is sharply
focused on what is most crucial.
A. Report only when needed
B. Report only by responsibility area
C. Rules only by exception
D. Rules of reporting
10. The controller should follow a few broad guidelines when putting together reports for
internal use.
A. Report only when needed
B. Report only by responsibility area
C. Rules only by exception
D. Rules of reporting
11. Which of the following does not belong to the rules of reporting?
A. Report only by responsibility area
B. Don’t Provide Comparative Information
C. Rules only by exception
D. Report only by responsibility area
12. Information is useless if it is supplied so late that the issue being reported on has already
been repaired or has considerably worse; an employee wants to receive information that
indicates trouble early on so that remedial action may be performed quickly. What rule of
reporting is this?
A. Issue Reports in a Timely Manner
B. Standardize reports
C. Ensure that reports are useful
D. Verify that reports are cost effective
 13. When the cost of a report seems to be prohibitive, the controller should discuss the
situation with the person seeking the report to decide whether the expense is justified by
the benefit of receiving the information.
A. Standardize reports
B. Ensure that reports are useful
C. Verify That Reports Are Cost Effective
D. Issue reports in a timely manner
14. A report may have been valuable when it was first written, but old reports have a history
of remaining unchanged as operating conditions change, culminating in a waste of paper.
A. Ensure That Reports Are Useful
B. Alter the form of presentation to match the reader’s needs
C. Include commentary
D. Show trends
15. This type of responsibility area is held responsible not only for profit results but also for
the investment required to produce the margin or profit.
A. Cost center
B. Profit center
C. Investment Center
D. Show trends
16. This information is crucial for the ability of higher management layers to make important
decisions.
A. Reduce The Level of Detail For Higher Levels of Management
B. Standardize reports
C. Ensure that reports are useful
D. Verify that reports are cost effective

III. TRUE OR FALSE (2 POINTS EACH)

17. Cost Center is held responsible for costs only. TRUE
18. Investment Center is held accountable for a stipulated profit contribution. Sales office,
subsidiary, or division might be a profit center. FALSE
19. Investment Center is held responsible not only for profit results but also for the
investment required to produce the margin or profit. TRUE
20. In the rule report only by responsibility area, a reader only wants to see information that
do not directly affects them. FALSE
21. The controller should follow a few broad guidelines when putting together reports for
internal use. TRUE
22. Keeping reports simple and clear is one of the rules of reporting. TRUE
23. There are three types of responsibility area. TRUE
IV. COMPUTATION (5 points each)
24. The employee of ABC Inc. is traveling to the onsite to pitch a new project. On 23 Jan
2021, the employee presented a meal expense of 200,000, the hotel cost of 100,000, and
miscellaneous cost of 250,000. On 24 Jan 2021, the employee reported entertainment and
movie expenses of 130,000 along with a meal expense of 230,000 and a hotel stay
expense of 500,000.

Help the payroll executive prepare the employee's reported expense report.

ANSWER:

ABC INC.
Expense Report
Employee Name __________________ Designation ___________________
Department_______________ Manager ____________________
Date Detail Hotel Meal Entertainment Misc. Total
January 23, Meal and fuel 100,000 200,000 0.00 250,000 550,000.00
2022 expense
January 24, Entertainement, 250,000 230,000 130,000 0.00 610,000.00
2022 meal, and hotel
Grand Total: 1,160,000.00

25. ABC Co. need to identify their total assets,total liabilities and their total working capital
for the month March 2019
 Here is the list of their assets and liabilities.
March 2019
Assets:
Cash - $821,000
Receivables- $95,000
Inventories - $ 15,090
Liabilities:
Accounts payable- $17,260
Taxes payable- $2,500

ANSWER
Total assets: $931,090
Total liabilities: $19,760
Total working capital: $911,330

26. Tony is employed in a grocery store in the U.S and gets a salary of $10.50 per hour and she
works for 38 hours every week.
Rate: $10.50
Hours: 38 hours
ANSWER:
$10.50*38 =$399 weekly

QUIZ

CHAPTER 5:
 CONTROLLERS ACCOUNTING FUNCTION
Planning and Control of Financial Statements
Chapter 5.1.1 : Sales
Chapter 5.1.2 : Distribution Expense
Chapter 5.1.3 : Direct Materials and Labor
Chapter 5.1.4 : Overhead
Chapter 5.1.5 : General and Administrative Expenses
Chapter 5.1.6 : Cash Investment
Chapter 5.1.7 : Receivables
Chapter 5.1.8 : Inventory
Chapter 5.1.9 : Property, Plant and Equipment
Chapter 5.1.10 : Liabilities
Chapter 5.1.11 : Equity

IDENTIFICATION
1. It is a company's physical or tangible long-term assets that typically have a life of more than one year.

Answer : PROPERTY,PLANT AND EQUIPMENT

2. It is the minimum rate of return that a capital project should earn if it is to be judged acceptable.
Answer: HURDLE RATES

3. It can be one of the largest dollar items listed in the balance sheet.
Answer: INVENTORY

4. The method is used in connection with the inventory record

Answer: MINIMUM-MAXIMUM SYSTEM

5. It is a basic financial function.

Answer: SOUND CASH MANAGEMENT

6. They are responsible for maintaining good relations with banks and other investors, providing the
timely interest and principal payments on debt, and investing the excess cash.

Answer: TREASURER

7. It refers to the ongoing business expenses not directly attributed to creating a product or service .

Answer: OVERHEAD

8. It can be accomplished on many items of manufacturing overhead expense in somewhat the same
fashion as discussed in connection with direct labor.

Answer: PREPLANNING

9. It is based on the assumption that every cost incurred must be the responsibility of one person
somewhere in the company.

Answer: RESPONSIBILITY ACCOUNTING

10. It should not be performed based on ability to bear the cost (e.g., the most profitable division is
charged with most of the expenses) since excessive charges to profitable divisions can hide their
true financial condition and can have a counterproductive effect on management behavior.

Answer: ALLOCATIONS

11. They are the responsible for the requisite sales volume of the right products and the planning and
control of distribution costs.

Answer: SALES MANAGER

12. Is any geographical area used by a company for sales planning, direction, or analysis.
Answer: TERRITORY

13. Is a dynamic area, constantly facing new problems.

Answer: SALES MANAGEMENT

14. Primary use of manufacturing cost accounting and cost analysis.

Answer: CONTROL OF COST

15. Material that can be definitely or specifically charged to a particular product, process, or job and that
becomes a component part of the finished product.

Answer: MEASURING DIRECT MATERIAL COST

16. To assure that the enterprise has_____________ the ability to meet cash requirements for any
purpose significant to the short- or long-term financial health of the company.

Answer: CASH ADEQUACY

17. The controller should be aware of the provisions that relate to indebtedness limits and certain uses
of cash.

Answer: CREDIT AGREEMENT PROVISIONS

18. It is also known as trading on the equity.

Answer: LEVERAGE

19. It is created initially by the owner's investment in the company, and may be increased from time to
time, as well as by net earnings.

Answer: SHAREHOLDER’S EQUITY

20. The cash manager interested in getting cash payments into the company bank accounts as quickly as
possible.

Answer: SHORTENING RECEIVABLES

TRUE OF FALSE

1. In inflation, those involved in analyzing capital investments may ponder how inflation should be
handled.

Answer: TRUE

2. In payback method, when the reviews have been completed, the projects must be ranked in some
order of priority.

ANSWER : FALSE ( PAYBACK METHOD - RANKING CAPITAL PROJECTS)

3. The reorder point is then calculated by multiplying the anticipated lead time in week by the
estimated demand in units per month, plus a safety stock quantity.

Answer: Month -Week ( FALSE)

4. The physical inventory is a mutual count of all inventory on hand and is used to obtain an inventory
valuation for the period- end financials.

Answer:TRUE

5. The controller may have five responsibilities related to cash in companies large enough for separate
treasury and controllership functions.
Answer: FALSE (FIVE- FOUR)

6. A corporate bond may not mature for many years, but one can always purchase a bond that is close
to its maturity date.

Answer: TRUE

7. Fixed cost increase or decrease in direct proportion to the volume of work

Answer: FALSE ( FIXED COST - VARIABLE COST)

8. Fixed overhead is overhead cost that remain static for a long period of time and do not change as
business activity ebbs and flows.

Answer: TRUE

9. If supervisors have no control over the costs that are allocated to them, then the allocated costs
should be separated from the revenues and costs for which they are responsible, especially if profit
goals and bonuses are involved.

Answer: TRUE

10. Many companies have established audit fees systems for the officers and top management, accruing
the estimated expense in the G&A category (office of the chairman).

Answer: FALSE (AUDIT FEES - INCENTIVE PAY)

11. In today's economy, the design, style, or type of product a firm sells may not change constantly.

Answer: FALSE (MAY NOT CHANGE - MAY CHANGE)

12. The advertising and sales promotion expense often is planned and controlled on a project basis.

Answer: TRUE

13. The controller's skills are not useful in sales accounting and analysis to assist marketing executives
in areas.

Answer: FALSE (NOT USEFUL - USEFUL)

14. The controller can perform many simple sales analyses to guide the sales effort.
Answer: TRUE

15. Controller is the fact finder regarding costs and is responsible for seeing that factory management is
furnished with sufficient cost information.

Answer: TRUE

16. A better approach that attacks costs before the design is finished is called target costing

Answer: TRUE

17. Debt capacity is a debt rating results in a credit score that indicates the perceived risk of default on
the underlying debt, which in turn impacts the price of the debt on the open market.

Answer: FALSE ( DEBT CAPACITY - BOND RATINGS)

18. Companies with a practical financial planning system follows a planning sequence using a five-step
process.

Answer: FALSE (FIVE - THREE)

19. Debt is a company's commitment to return to lender both the interest and principal on an initial
series of payments.

Answer: TRUE

20. A wire transfer is a post box opened in the name of the seller but accessed and serviced by a
remittance processor.

Answer: FALSE (WIRE TRANSFER - LOCKBOX)

MULTIPLE CHOICE

1. It technique takes cash flow timing into account, it has been adopted as an effective tool in ranking
and judging the profitability of the investments.

A. Hurdle Rates
B. Discounted Cash Flow
C. Payback Method
D. Accountants Method
Answer : B

2. This method recognizes the available stock as well as the physical stock. Available stock is defined as
stock on order, plus physical stock, less the unfilled requirement.

[Link] check system

[Link] stock method

[Link] method.

[Link]-maximum system

Answer: C

3. This is a package of government instruments, usually comprised of Treasury bills, notes, and bonds,
that is assembled by a fun management company.

A. Bonds near maturity dates

B. Bankers’ acceptances

C. Money market fund

D. U.S. Treasury issuances

Answer: C

4. Where the cost of getting the goods to the factory site is identifiable with particular material or lots,
the cost may properly be added to the raw material

A. Inbound transportation Costs

B. Purchasing department expense
C. Cost Allocation
D. Variable Cost
Answer: A

5. This expense is incurred on behalf of the board of directors and senior managers of a company, and so
should be absorbed at the corporate level.

[Link] and officers insurance

[Link] expense

[Link] expenses

[Link] income and expense

Answer: A

6. This information is recorded in the general ledger and can easily be converted into trends in expense
line items or expenses as a percentage of revenue. A. By the nature of the expense or object of
expenditure.

B. By contribution margin.
C. By functions or functional operation performed.
D. By matching revenues to functions.
Answer: A

7. The controller creates and reviews statistics for unfavorable trends.

A. Problems of distribution
B. Problems of product
C. Problems relating to the method of sale
D. Problem of organization
Answer: A

8. The controller also may provide services in connection with forecasting and market studies.

A. Problems of price
B. Sales budgets and quotas
C. Problem of planning and control
D. Problems relating to the method of sale
Answer: B

9. Direct labor costs must be established before contemplating controls, just like with direct materials
cost controls.

a. Controlling Direct Labor Cost

b. Measuring Direct Labor Cost

c. Controlling Direct Material Quantities

d. Measuring Direct Material Costs

Answer: A

10. It is an obligations arising from past transactions or events.

A. Liabilities
B. Leverage
C. Bond
D. Debt capacity
Answer: A

11. Dividend payments are determined by a number of influences except:

A. Payout ratio
B. Cash flow of the enterprise
C. Industry practices
D. Shareholder's expectation
Answer: A

12. A form of equity that is issued to the stockholders and that carries a specific interest rate.

A. Dividend payments
B. Common shares
C. Preferred stock
D. Common stock
Answer: C

13. Prices appearing on invoices are independently checked against established price lists, and all
extensions and footings are checked.

A. Mail invoices separately

B. Review bad debts
C. Audit prices and extensions
D. Confirm balances
Answer: C

14. All handling of cash should be segregated from the maintenance of receivable records

A. Confirm balances
B. Segregate duties
C. Review special adjustments
D. Review bad debts
Answer: B

15. The controllers first experience with fraud may be the review of "what went wrong" following the
loss of assets. A. Receivables Fraud
B. Receivables Control
C. Shortening Receivables
D. Receivable Fraud and Control
Answer: D