When a company sells 10,000 shares of its common stock to investors, which type of accounting is primarily responsible for recording this transaction?

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

Answer: (A)

Verified step by step guidance

1. Understand the nature of the transaction: The company is selling shares of its common stock to investors. This is a financial transaction that impacts the company's equity and involves external stakeholders.
2. Identify the purpose of the accounting type: Financial accounting is primarily concerned with recording, summarizing, and reporting financial transactions to external parties, such as investors, creditors, and regulatory agencies.
3. Compare the other accounting types: Tax accounting focuses on compliance with tax laws and regulations, managerial accounting is used for internal decision-making, and cost accounting deals with analyzing costs for production and operations.
4. Determine the relevance: Since the transaction involves external reporting (to investors), financial accounting is the appropriate type of accounting responsible for recording this transaction.
5. Conclude: Financial accounting is the correct answer because it ensures that the sale of shares is accurately recorded in the company's financial statements, which are shared with external stakeholders.