Multiple Choice
Which of the following is NOT an example of income in financial accounting?
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1. Introduction to Accounting
Types of Accounting
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Which of the following statements is true about financial accounting?
A
Financial accounting is primarily concerned with internal decision-making processes.
B
Financial accounting does not require adherence to generally accepted accounting principles (GAAP).
C
Financial accounting reports are typically prepared for the use of company management only.
D
Financial accounting focuses on providing information to external users such as investors and creditors.
Verified step by step guidance1
Understand the purpose of financial accounting: Financial accounting is designed to provide information about a company's financial performance and position to external users, such as investors, creditors, and regulatory agencies.
Clarify the difference between financial accounting and managerial accounting: Financial accounting focuses on external reporting, while managerial accounting is concerned with internal decision-making processes.
Recognize the importance of GAAP: Financial accounting requires adherence to generally accepted accounting principles (GAAP) to ensure consistency, reliability, and comparability of financial statements.
Identify the audience for financial accounting reports: Financial accounting reports are prepared for external users, not solely for company management. This distinguishes it from managerial accounting.
Conclude that the correct statement is: Financial accounting focuses on providing information to external users such as investors and creditors.
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