ACCA BT · Chapter 5
The role of accounting and the finance function MCQs with Answers
10 multiple-choice questions on The role of accounting and the finance function for ACCA BT Business and Technology. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
Which of the following is the main purpose of financial accounting?
- A) To record transactions and produce financial statements for external users
- B) To provide detailed costing information for internal decision-making
- C) To manage the organisation's cash investments and borrowing
- D) To set the organisation's long-term strategy
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Answer: A) To record transactions and produce financial statements for external users
Financial accounting records the organisation's transactions and summarises them in financial statements, mainly for external users such as shareholders, lenders and tax authorities. Detailed costing for internal decisions is management accounting, managing cash and borrowing is the treasury function, and strategy-setting is the role of the board.
Question 2
Which of the following is a typical feature of management accounting information?
- A) It may be prepared in any format that is useful to managers and often includes forecasts
- B) It must be prepared in accordance with International Financial Reporting Standards
- C) It is mainly produced for shareholders and lenders
- D) It is required to be audited by an independent external auditor
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Answer: A) It may be prepared in any format that is useful to managers and often includes forecasts
Management accounting serves internal managers, so there is no prescribed format and it frequently includes budgets, forecasts and non-financial information. Compliance with IFRS, a focus on shareholders and lenders, and external audit are characteristics of published financial statements.
Question 3
Which of the following activities is most likely to be carried out by an organisation's treasury function?
- A) Preparing standard costs for products
- B) Managing foreign currency exposure and short-term cash surpluses
- C) Maintaining the sales ledger
- D) Recording depreciation in the general ledger
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Answer: B) Managing foreign currency exposure and short-term cash surpluses
Treasury management covers liquidity, cash investment, borrowing, and managing currency and interest rate risk. Standard costing is a management accounting task, while maintaining the sales ledger and posting depreciation are financial accounting tasks.
Question 4
Which of the following best describes the role of the management accountant in the 'control' stage of the management process?
- A) Recording all sales invoices in the receivables ledger
- B) Comparing actual results with budgets and reporting variances for management action
- C) Negotiating new long-term loan finance with banks
- D) Designing the company's marketing campaigns
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Answer: B) Comparing actual results with budgets and reporting variances for management action
Control involves monitoring actual performance against plans, identifying variances and enabling managers to take corrective action. Management accountants support this through budgetary control and variance reports. Recording invoices is transaction processing, negotiating loans is treasury, and marketing campaigns are a marketing responsibility.
Question 5
Which of the following systems is used to record routine, day-to-day business transactions such as sales and purchases?
- A) An executive information system
- B) A decision support system
- C) A transaction processing system
- D) An expert system
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Answer: C) A transaction processing system
A transaction processing system records high volumes of routine transactions and provides the base data for other systems. Executive information systems give senior managers summarised strategic information, decision support systems help managers analyse semi-structured problems, and expert systems apply stored specialist knowledge to give advice.
Question 6
Information for decision-making should have certain qualities. Which of the following is the best example of 'relevance'?
- A) A report for a pricing decision that includes only costs that will change as a result of the decision
- B) A report produced within one day of the period end
- C) A report that has been checked by the internal auditors for errors
- D) A report that is presented using clear charts and tables
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Answer: A) A report for a pricing decision that includes only costs that will change as a result of the decision
Relevant information is information that is useful for its purpose and relates to the decision being made, such as future incremental costs for a pricing decision. Speed of production relates to timeliness, checking for errors relates to accuracy, and clear presentation relates to understandability.
Question 7
The accounting function interacts with other parts of the organisation. Which of the following is most likely to require information from the purchasing department?
- A) The receivables section, to chase overdue customer accounts
- B) The payroll section, to calculate employees' overtime pay
- C) The accounts payable section, to match supplier invoices with orders
- D) The treasury section, to arrange an overdraft facility
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Answer: C) The accounts payable section, to match supplier invoices with orders
Accounts payable needs purchase orders (and goods received notes) from purchasing to perform a matching check before supplier invoices are approved for payment. Receivables chasing relies on sales data, payroll relies on HR and timesheet data, and arranging an overdraft relies on cash flow forecasts.
Question 8
A company's payroll process involves calculating gross pay, deducting tax and other amounts, and paying employees. Which of the following is the most effective control to prevent payments to fictitious employees?
- A) Requiring the HR department, not payroll staff, to authorise additions to the employee master file
- B) Checking the arithmetic of the total payroll each month
- C) Paying all employees by bank transfer rather than cash
- D) Comparing total payroll cost with the previous month
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Answer: A) Requiring the HR department, not payroll staff, to authorise additions to the employee master file
Segregating the authority to add new employees (HR) from the processing of pay (payroll) prevents a payroll clerk from creating and paying a fictitious 'ghost' employee. Arithmetic checks do not detect fictitious names, bank transfers can be made to a fraudster's account, and month-on-month comparisons would not detect a small, consistent fraud.
Question 9
Which of the following users of financial statements is most interested in assessing whether a company can repay loans when they fall due?
- A) Lenders
- B) Employees
- C) The general public
- D) Competitors
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Answer: A) Lenders
Lenders, such as banks and bondholders, use financial statements primarily to assess the entity's liquidity and ability to meet interest and capital repayments. Employees focus on job security and pay, the public on wider impact, and competitors on comparative performance.
Question 10
Which of the following best describes the role of the finance function in an organisation that uses 'business partnering'?
- A) Finance staff work alongside operational managers to provide insight and support decision-making
- B) Finance staff are relocated to a separate country to reduce processing costs
- C) All routine accounting is replaced by software so the finance function is removed
- D) The finance function concentrates solely on statutory reporting and tax compliance
Show answer & explanation
Answer: A) Finance staff work alongside operational managers to provide insight and support decision-making
Business partnering involves finance professionals working closely with operational managers, interpreting data and contributing to planning and decisions rather than simply recording transactions. Relocation describes offshoring, automation does not remove the need for finance expertise, and a sole focus on compliance is the opposite of a partnering role.