Question

Which of the following statements is false?

a. A good management accounting system can become a source of a competitive advantage for a company.
b. Management accounting is just prospective while financial accounting is both retrospective and prospective.
c. Management accounting primarily serves internal users while financial accounting primarily serves external users.
d. Management accounting information has no prescribed rules about its content while financial accounting does.

Answer 1

The false statement is that management accounting is purely prospective, whereas in reality, management accounting also includes retrospective analysis. Financial accounting indeed covers both past and future financial aspects.

Step-by-step explanation:

The statement that is false is: b. Management accounting is just prospective while financial accounting is both retrospective and prospective. Management accounting often involves forward-looking information as it is used for decision-making, budgeting, and forecasting, but it can also include retrospective analysis, such as variance analysis. This contrasts with financial accounting, which does indeed encompass both past financial performance (retrospective, like profit and loss statements) and future financial expectations (prospective, such as projected cash flows).

It is true that a good management accounting system can be a source of competitive advantage by providing relevant information for strategic decision-making, that management accounting primarily serves internal users while financial accounting serves external users, and that management accounting is not regulated by prescribed rules as financial accounting is, which adheres to standards like GAAP or IFRS.