When you purchase shares of a company in the market, which type of accounting is primarily concerned with recording and reporting this transaction?

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

Answer: (D)

Verified step by step guidance

1. Understand the nature of the transaction: Purchasing shares of a company in the market is an investment activity and involves recording the financial details of the transaction.
2. Identify the type of accounting that deals with external reporting: Financial accounting is primarily concerned with recording and reporting transactions that are relevant to external stakeholders, such as investors, creditors, and regulatory bodies.
3. Differentiate between the options provided: Managerial accounting focuses on internal decision-making, cost accounting deals with cost analysis and control, and tax accounting is concerned with compliance to tax laws. None of these directly address external financial reporting.
4. Recognize that financial accounting is the correct type: Financial accounting ensures that transactions like purchasing shares are recorded in accordance with accounting standards and reported in financial statements.
5. Conclude that financial accounting is the appropriate choice for recording and reporting the purchase of shares in the market.