Multiple Choice
Which of the following is considered a primary working area of accounting?
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1. Introduction to Accounting
Types of Accounting
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Which of the following types of accounting is most similar to unsecured credit in terms of relying on trust rather than collateral?
A
Auditing
B
Financial accounting
C
Managerial accounting
D
Trust accounting
Verified step by step guidance1
Understand the concept of 'unsecured credit': Unsecured credit refers to loans or credit extended without requiring collateral, relying instead on the trustworthiness and creditworthiness of the borrower.
Analyze the term 'trust accounting': Trust accounting involves managing and reporting financial transactions for assets held in trust, where fiduciary responsibility and trustworthiness are key components.
Compare the other types of accounting: Auditing focuses on verifying financial records for accuracy and compliance, financial accounting deals with preparing financial statements for external users, and managerial accounting focuses on internal decision-making processes.
Identify the similarity: Trust accounting is most similar to unsecured credit because both rely heavily on trust rather than physical assets or collateral.
Conclude the reasoning: The correct answer is 'Trust accounting' because it aligns with the concept of relying on trust, similar to unsecured credit.
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