Which type of accounting is primarily concerned with determining the legal responsibility of an individual or entity for business actions, debts, and obligations?

• A. Managerial Accounting
• B. Forensic Accounting
• C. Financial Accounting
• D. Liability Accounting

Answer: (D)

Verified step by step guidance

1. Step 1: Begin by understanding the concept of liability accounting. Liability accounting focuses on recording and managing obligations or debts that an individual or entity is legally responsible for.
2. Step 2: Compare the given options to the definition of liability accounting. Managerial accounting deals with internal decision-making processes, forensic accounting involves investigating financial fraud, and financial accounting focuses on preparing financial statements for external users.
3. Step 3: Recognize that liability accounting is not a standalone type of accounting but rather a component of financial accounting. Financial accounting includes the recording and reporting of liabilities as part of the balance sheet.
4. Step 4: Understand that liabilities are obligations that arise from past transactions or events, such as loans, accounts payable, or legal responsibilities, and are reported in financial accounting.
5. Step 5: Conclude that the correct answer is not liability accounting as a separate type but rather financial accounting, which encompasses the management and reporting of liabilities.