Financial Accounting ACCA Questions With Complete Solutions

Financial Accounting correct answer: The production of financial statements for external users. They are public documents and will not include details about individual products' profitability etc. Management accounting correct answer: Management require much more detail and up-to-date information in order to control the business and plan for the future. MA is concerned with identifying, presenting and interpreting information used for: - Formulating strategy - Planning and controlling activities - Decision making - Optimising the use of resources Main users of financial statements correct answer: - Investors - Employees - Lenders - Government - Suppliers - Customers - The public Why do investors look at financial statements? correct answer: They are interested in potential profits and the security of their investment. Future profits based on past performance shown in P&L. Security of investment shown by financial strength and solvency of entity as shown in financial position. Examples, pension funds & unit trusts. Why do employees look at financial statements? correct answer: To know if an employer can offer secure employment and possible pay rises/benefits. Information about divisional profitability is useful is part of the business is threatened with closure. Why do lenders look at financial statements? correct answer: To know if they can be repaid. This depends on the solvency of the company shown in financial position. Why do Government agencies look at financial statements? correct answer: Need to know how the economy is performing in order to plan financial and industrial policies. Why do suppliers look at financial statements? correct answer: Need to know if they will be paid - reassurance of financial health. Why do customers look at financial statements? correct answer: Need to know that an entity can continue to supply them in the future.