BT9.1

Which of the following is NOT one of the purposes of budgets?

• responsibility for expenditure

• motivation of employees

• co-ordination of staff

• costing of units

Answer explanation

The purpose of budgets includes responsibility for expenditure, motivation of employees, and co-ordination of staff. However, costing of units is not a primary purpose of budgets, making it the correct answer.

Which of the following statements regarding integrated reports is correct?

• They involve the merging of the other financial statements to produce an overall view of company performance

• They are designed to show the organisation’s profitability more clearly

• They include information on anything that is felt to be of interest to the users of the financial statements

• They include only relevant financial information for the users of the financial statements

Answer explanation

Integrated reports provide a holistic view by including diverse information that interests users, not just financial data. This makes the correct choice about including all relevant information for users.

What does the term 'true and fair view' in financial statements imply?

• The statements must follow all appropriate accounting standards

• The statements must be audited by external parties

• The statements must be approved by the shareholders

• The statements must be prepared in a specific format

Answer explanation

The term 'true and fair view' implies that financial statements must adhere to all relevant accounting standards, ensuring accuracy and reliability in reporting.

An important advantage of using loans to finance investment is:

• loan interest payments can usually be suspended if profits are low

• the timing of loan payments is often at the company’s discretion

• loan interest is tax deductible

• banks will often not require security for loan advances

Answer explanation

The directors are responsible for producing financial statements under company legislation, as they oversee the company's financial reporting and ensure compliance with legal requirements.

What is the main role of the IFRS Foundation?

• To prepare financial statements

• To develop and promote financial reporting standards

• To enforce tax regulations

• To manage corporate finance

Answer explanation

The IFRS Foundation's main role is to develop and promote financial reporting standards, ensuring consistency and transparency in financial statements globally. This is crucial for investors and stakeholders.

Which function is primarily concerned with internal management and planning?

• Financial accounting

• Management accounting

• Treasury management

• Regulatory compliance

Answer explanation

Management accounting focuses on internal management and planning by providing relevant financial and non-financial information to help managers make informed decisions, unlike financial accounting which is more external.

What is a key benefit of preparing budgets in management accounting?

• They eliminate the need for financial audits

• They are used to prepare financial statements

• They provide a basis for management appraisal

• They ensure compliance with tax laws

Answer explanation

A key benefit of preparing budgets in management accounting is that they provide a basis for management appraisal, allowing for performance evaluation against set financial goals.

Which of the following is NOT a key function of the treasury?

• Generating internal funds

• Handling corporate finance strategies

• Managing cash flows

• Preparing financial statements

Answer explanation

Preparing financial statements is not a key function of the treasury. The treasury focuses on generating internal funds, handling corporate finance strategies, and managing cash flows.

What does the acronym CRUMPET in budgeting stand for?

• Coordination, Responsibility, Utilization, Motivation, Planning, Evaluation, Telling

• Cost, Revenue, Utilization, Management, Planning, Evaluation, Telling

• Coordination, Revenue, Utilization, Management, Planning, Evaluation, Tracking

• Cost, Responsibility, Utilization, Motivation, Planning, Evaluation, Telling

Answer explanation

The correct choice is 'Coordination, Responsibility, Utilization, Motivation, Planning, Evaluation, Telling' as it accurately represents the components of the CRUMPET acronym in budgeting.

What is the primary focus of financial accounting?

• Internal management reporting

• Production of annual financial statements

• Cash flow management

• Tax compliance

Answer explanation

The primary focus of financial accounting is the production of annual financial statements, which provide a summary of a company's financial performance and position to external stakeholders.