Which type of accounting is primarily concerned with tracking and reporting the amounts a business owes to others, such as loans and accounts payable?

• A. Equity accounting
• B. Revenue accounting
• C. Liability accounting
• D. Cost accounting

Answer: (C)

Verified step by step guidance

1. Understand the concept of liability accounting: Liability accounting focuses on tracking and reporting obligations a business owes to others, such as loans, accounts payable, and other financial commitments.
2. Differentiate liability accounting from other types of accounting: Equity accounting deals with ownership interests, revenue accounting tracks income earned, and cost accounting focuses on expenses and cost management.
3. Recognize the key elements of liabilities: Liabilities are obligations that arise from past transactions or events, and they are settled over time through the transfer of money, goods, or services.
4. Identify examples of liabilities: Common examples include accounts payable (amounts owed to suppliers), loans payable (borrowed funds), and accrued expenses (expenses incurred but not yet paid).
5. Understand the importance of liability accounting: It helps businesses manage their financial obligations effectively, ensuring accurate reporting and compliance with financial regulations.