Which type of accounting is primarily concerned with recording and reporting transactions where both the principal and agent have agreed to the agency relationship through a written or oral agreement?

• A. Managerial Accounting
• B. Fiduciary Accounting
• C. Cost Accounting
• D. Tax Accounting

Answer: (B)

Verified step by step guidance

1. Understand the concept of fiduciary accounting: Fiduciary accounting is primarily concerned with recording and reporting transactions where there is a fiduciary relationship between a principal and an agent. This relationship is established through a written or oral agreement.
2. Differentiate fiduciary accounting from other types of accounting: Managerial accounting focuses on internal decision-making, cost accounting deals with cost analysis, and tax accounting is concerned with tax compliance and planning. Fiduciary accounting specifically addresses the responsibilities of an agent managing assets on behalf of a principal.
3. Recognize the key elements of fiduciary accounting: It involves transparency, accountability, and adherence to the terms of the fiduciary agreement. The agent must act in the best interest of the principal and provide accurate financial reporting.
4. Identify examples of fiduciary relationships: Common examples include trustees managing trust funds, executors of estates, and agents handling financial matters for clients. These relationships require detailed accounting to ensure proper management and reporting.
5. Apply the concept to the question: Since the question specifies transactions agreed upon through a written or oral agreement between a principal and an agent, fiduciary accounting is the correct answer as it directly addresses this type of relationship.