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IAI Actuarial Core Principles · Business Finance · Construction and features of company accounts and reports

Which statement best describes the main purpose of general-purpose financial statements prepared by a company?

General-purpose financial statements aim to provide information on financial position, performance and cash flows that helps a broad range of users make economic decisions. They are not tax computations, internal costing reports, share valuations or forecasts, which serve other specific purposes.

  1. ATo give information about the entity's financial position, performance and cash flows that is useful to a wide range of users in making economic decisionsCorrect
  2. BTo compute the exact tax liability payable to the government for the year
  3. CTo show the market value of the company's shares at the reporting date
  4. DTo provide detailed internal cost data for managers to control departmental spending
  5. To forecast the profits the company will earn over the next five years

Explanation

General-purpose statements report past financial position, performance and cash flows to help many users take economic decisions. Tax computation and internal costing are separate exercises, market value is set by trading rather than reported, and accounts are historical rather than forecasts.

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