Multiple Choice
Which type of accounting is primarily concerned with providing information to help a for-profit business maximize equity?
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1. Introduction to Accounting
Types of Accounting
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Which type of accounting is primarily concerned with the recording and reporting of a company's financial transactions for external users such as investors and regulators?
A
Cost accounting
B
Managerial accounting
C
Tax accounting
D
Financial accounting
Verified step by step guidance1
Understand the purpose of each type of accounting mentioned in the problem: Cost accounting focuses on analyzing and controlling costs within a company, Managerial accounting is used for internal decision-making, Tax accounting deals with compliance with tax laws, and Financial accounting is concerned with recording and reporting financial transactions for external users.
Identify the key requirement in the question: The type of accounting that is primarily concerned with external users such as investors and regulators.
Recall that Financial accounting is designed to provide standardized financial statements (e.g., income statement, balance sheet, cash flow statement) that comply with regulatory requirements and are useful for external stakeholders.
Recognize that external users rely on Financial accounting to assess the financial health and performance of a company, making it distinct from other types of accounting that focus on internal processes or tax compliance.
Conclude that the correct answer is Financial accounting, as it aligns with the description provided in the question.
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