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CS Executive · Corporate Accounting and Financial Management · Introduction to Accounting

Which of the following best describes the primary function of financial accounting for a company?

The primary function of financial accounting is recording, classifying and summarising financial transactions in order to report a firm's results and financial position to users. Cost allocation is the work of cost accounting, while forecasting and tax planning are secondary uses of the information.

  1. ARecording, classifying and summarising financial transactions to report results and financial positionCorrect
  2. BForecasting future sales using statistical models
  3. CDetermining the cost of each unit by allocating overheads
  4. DEnsuring that the company pays tax at the lowest possible rate

Explanation

Accounting is the process of identifying, recording, classifying, summarising and interpreting financial transactions so that users can judge results and financial position. Cost determination belongs to cost accounting, and forecasting and tax minimisation are not its primary function.

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