ACCA Applied Knowledge · Business and Technology · Financial information provided by business
A retailer's directors compare monthly actual costs with the budget and investigate large differences. Which purpose of financial information does this illustrate?
This illustrates control. Managers compare actual results with the budget and investigate significant variances so they can take corrective action. It is an internal management purpose, different from meeting statutory filing requirements or reporting to lenders.
- AControlCorrect
- BStatutory compliance
- CStewardship reporting to lenders
Explanation
Comparing actual results to budget and investigating differences is a control activity within management accounting. Statutory compliance and lender reporting concern external requirements, not internal monitoring.
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