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ACCA Applied Knowledge · Business and Technology · Accounting and finance functions within business organisations

Which of the following best describes the primary purpose of the financial accounting function in a business?

The financial accounting function exists mainly to record transactions and prepare financial statements for external users such as shareholders, lenders and tax authorities. Cash forecasting and financing are treasury matters, while standard costing and variance reporting are management accounting tasks for internal managers.

  1. ATo record transactions and prepare financial statements for external users such as shareholders and lendersCorrect
  2. BTo forecast future cash needs and decide how new projects should be financed
  3. CTo set detailed standard costs for each product and report variances to production managers

Explanation

Financial accounting records transactions and produces financial statements, mainly for external stakeholders. Forecasting cash needs and financing decisions belong to treasury or financial management, and standard costing is a management accounting activity.

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