Which one of the following statements is true?
Select one:
A. The user group of information from management accounting reports are the external users.
B. Financial accounting reports are usually produced annually but may be prepared half-yearly, quarterly or even monthly.
C. Financial accounting reports are not required by law.
D. Management accounting reports tend to be general-purpose.
The correct answer and explanation is :
The correct answer is B. Financial accounting reports are usually produced annually but may be prepared half-yearly, quarterly, or even monthly.
Explanation:
Let’s break down each option:
A. The user group of information from management accounting reports are the external users.
This statement is incorrect. Management accounting reports are primarily intended for internal users of the organization, such as managers, executives, and decision-makers. These reports help in planning, controlling, and decision-making processes. External users, such as investors, creditors, and regulators, typically rely on financial accounting reports, not management accounting.
B. Financial accounting reports are usually produced annually but may be prepared half-yearly, quarterly, or even monthly.
This is the correct statement. Financial accounting reports, such as the balance sheet, income statement, and cash flow statement, are generally prepared annually for external reporting, especially for tax and regulatory compliance purposes. However, organizations may also prepare these reports quarterly or half-yearly, depending on the size, requirements, or nature of the business. For example, publicly traded companies often release quarterly reports to shareholders and investors to provide updates on their financial performance.
C. Financial accounting reports are not required by law.
This statement is incorrect. Financial accounting reports are required by law, especially for publicly listed companies, which must follow regulatory guidelines such as those from the Financial Accounting Standards Board (FASB) or International Financial Reporting Standards (IFRS). These reports are necessary for ensuring transparency and accountability to external stakeholders like investors, creditors, and tax authorities.
D. Management accounting reports tend to be general-purpose.
This statement is also incorrect. Management accounting reports are usually specific-purpose rather than general-purpose. They are tailored to meet the needs of specific managers or decision-makers within the organization, focusing on detailed, internal data to guide strategic decisions.
In summary, option B is the most accurate statement because it correctly describes the typical frequency of financial accounting reports.