Sofia is starting a small business and wants to track her company's financial transactions, prepare financial statements, and ensure compliance with accounting standards. Which type of accounting is most suitable for Sofia's needs?

• A. Financial Accounting
• B. Tax Accounting
• C. Forensic Accounting
• D. Cost Accounting

Answer: (A)

Verified step by step guidance

1. Understand the purpose of each type of accounting mentioned in the problem: Financial Accounting, Tax Accounting, Forensic Accounting, and Cost Accounting.
2. Recognize that Financial Accounting focuses on recording, summarizing, and reporting a company's financial transactions to external stakeholders through financial statements such as the income statement, balance sheet, and cash flow statement.
3. Identify that Tax Accounting is primarily concerned with preparing tax returns and ensuring compliance with tax laws, which is not the primary need described in the problem.
4. Understand that Forensic Accounting involves investigating financial discrepancies or fraud, which is unrelated to Sofia's goal of tracking transactions and preparing financial statements.
5. Note that Cost Accounting is used for internal decision-making by analyzing costs and efficiency, which is not the primary focus of Sofia's needs. Therefore, Financial Accounting is the most suitable type for her business.