Which type of accounting determines whether personal life insurance premiums are usually deductible?

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

Answer: (A)

Verified step by step guidance

1. Understand the context of the question: The problem is asking about the deductibility of personal life insurance premiums, which is a tax-related issue. This means the focus is on tax accounting rather than other types of accounting.
2. Clarify the role of tax accounting: Tax accounting deals with the preparation and filing of tax returns, compliance with tax laws, and determining the tax implications of various transactions, including deductions.
3. Differentiate between the accounting types: Financial accounting focuses on preparing financial statements for external users, cost accounting deals with cost analysis for production and operations, and managerial accounting supports internal decision-making. None of these directly address tax deductibility.
4. Relate the deductibility of personal life insurance premiums to tax laws: Tax accounting evaluates whether certain expenses, such as personal life insurance premiums, qualify as deductible under tax regulations. Generally, personal life insurance premiums are not deductible because they are considered personal expenses.
5. Conclude that tax accounting is the correct type of accounting to determine deductibility: Since tax accounting specifically addresses compliance with tax laws and deductions, it is the appropriate type of accounting for this question.