Examkin

Question

Difficulty: MediumObjectives and Functions of Accounting

A business manager receives financial statements at the end of an accounting period to determine whether to expand operations or cut costs. Which primary function of accounting is being demonstrated?

  1. Communicating financial information to assist managerial decision-makingAnswer
  2. B
    Systematically recording routine daily transactions in subsidiary books
  3. C
    Posting entries to separate the owner's personal equity from business assets
  4. D
    Balancing ledger accounts at regular interval check periods

Answer

Communicating financial information to assist managerial decision-making
A major objective and function of accounting is to interpret financial performance and communicate relevant financial reports to management, enabling informed decision-making regarding business operations.

Step-by-Step Solution

1
Analyze the business scenario described in the stem
The manager uses financial statement data to decide between operational expansion or cost reduction.
Identifying how financial data is used helps determine whether the activity is bookkeeping or accounting.
2
Distinguish between bookkeeping and accounting functions
Bookkeeping focuses on the mechanical recording and posting of financial transactions, while accounting involves interpreting data and communicating results to aid decision-making.
Strategic decision-making relies directly on the analytical and reporting function of accounting.

Key Concept

Objectives and Functions of Accounting
Estimated Time:1m 0s
Rate this question

Topics

Objectives and Functions of Accounting

More questions from this topic