If you've decided to buy a house that is valued at \$1 million, which type of accounting would primarily be concerned with recording and reporting this purchase in the financial statements of a business?

• A. Cost accounting
• B. Tax accounting
• C. Financial accounting
• D. Managerial accounting

Answer: (C)

Verified step by step guidance

1. Understand the context of the problem: The question is asking which type of accounting is primarily concerned with recording and reporting the purchase of a house in the financial statements of a business.
2. Review the definitions of the accounting types mentioned: Financial accounting focuses on recording, summarizing, and reporting transactions in financial statements for external users. Cost accounting deals with tracking and analyzing costs for internal decision-making. Tax accounting focuses on compliance with tax laws and regulations. Managerial accounting provides information for internal management decision-making.
3. Identify the key aspect of the transaction: The purchase of a house valued at \$1 million is a financial transaction that would need to be recorded in the financial statements of a business, which are used by external stakeholders such as investors, creditors, and regulatory agencies.
4. Determine the correct type of accounting: Since the transaction involves recording and reporting in financial statements, the correct type of accounting is Financial Accounting.
5. Conclude that Financial Accounting is the appropriate choice for this scenario, as it is concerned with external reporting and the preparation of financial statements.