ACCA Applied Knowledge · Business and Technology · Accounting and finance functions within business organisations
Zeta plc prepares monthly reports showing variances of actual costs against standard for each production department, and also an annual statement of financial position for shareholders. Which pairing of report and primary purpose is most accurate?
Monthly departmental variance reports are management accounting tools that help managers control operations, while the annual statement of financial position is a financial accounting report giving external users a view of the entity's financial position. Being historical does not make a report suitable mainly for external stakeholders.
- AVariance reports serve shareholders; the statement of financial position serves department managers
- BVariance reports support managers' control of operations; the statement of financial position reports the entity's financial position to external usersCorrect
- CBoth reports are mainly for control by internal managers
- DBoth reports are mainly for external stakeholders, as both are historical
Explanation
Variance reports are a management accounting tool for internal control and are prepared frequently for departments. The statement of financial position is a financial accounting report for external users. Being historical does not make a report external, so the last option is wrong.
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