Multiple Choice
Which one of the following is NOT one of the four basic financial statements?
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1. Introduction to Accounting
The Financial Statements
Struggling with Financial Accounting?
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Which of the following is most associated with financial accounting?
A
Budgeting for internal management purposes
B
Setting employee performance targets
C
Preparation of financial statements for external users
D
Cost analysis for production processes
Verified step by step guidance1
Step 1: Understand the scope of financial accounting. Financial accounting primarily focuses on preparing financial statements that provide information about a company's financial performance and position to external users, such as investors, creditors, and regulatory agencies.
Step 2: Differentiate financial accounting from managerial accounting. Managerial accounting is concerned with internal processes, such as budgeting, cost analysis, and setting employee performance targets, which are used for decision-making within the organization.
Step 3: Analyze the options provided in the question. Budgeting for internal management purposes, setting employee performance targets, and cost analysis for production processes are all activities associated with managerial accounting, not financial accounting.
Step 4: Identify the correct answer. The preparation of financial statements for external users is the activity most associated with financial accounting, as it aligns with its primary purpose of providing information to external stakeholders.
Step 5: Conclude that financial accounting is distinct from managerial accounting in its focus on external reporting, and the correct answer is 'Preparation of financial statements for external users.'
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