Multiple Choice
The first step in activity-based costing (ABC) is to:
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1. Introduction to Accounting
Types of Accounting
Struggling with Financial Accounting?
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Michelle spent $30 on caviar last week. Recording this transaction in the company's financial records is an example of which type of accounting?
A
Managerial accounting
B
Financial accounting
C
Cost accounting
D
Tax accounting
Verified step by step guidance1
Understand the definitions of the accounting types mentioned in the problem: Financial accounting, Managerial accounting, Cost accounting, and Tax accounting.
Financial accounting involves recording, summarizing, and reporting transactions for external stakeholders, such as investors, creditors, and regulatory agencies. It focuses on historical data and compliance with standards like GAAP or IFRS.
Managerial accounting is used internally by management to make decisions. It focuses on future projections, budgets, and operational efficiency rather than external reporting.
Cost accounting is a subset of managerial accounting that focuses on analyzing the costs of production or services to improve efficiency and profitability.
Tax accounting deals with preparing tax returns and ensuring compliance with tax laws. It focuses on transactions relevant to tax obligations rather than general financial reporting.
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