Chapter 1 Solutions 1.1 Explain the difference between accounting, an account, and accountability. Accounting is a collection of systems and processes used to record, report and interpret business transactions. An account is an explanation or report in financial terms about those transactions. Accountability arises from the stewardship function, that managers have to provide an account to other stakeholders in the business. 1.2 Summarise the main activities of management accountants. The main activities of management accountants includes participation in planning, primarily through budgets; generating, analysing, presenting and interpreting information to support decision-making, and monitoring and controlling performance. 1.3 Explain how the role of management accounting has changed over the last 100 years. The origin of management accounting was cost accounting in factories, where accountants were close to the business and advised non-financial managers. Management accountants have advised on economies of scale as well as of scope as businesses grew and diversified as divisionalization, conglomerates and multinational organizations increased the demand for accounting information. Non-financial performance information has come to challenge management accounting information. Although new techniques have been developed, new manufacturing technologies and the growth of service industries has not been matched by the changing role of management accountants. Management accounting is increasingly decentred in organizations, with IT carrying out the bulk of routine transaction processing. Organizations are increasingly looking for management accountants to use their financial expertise to contribute to strategy formulation and implementation.

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