Which of the following types of accounting primarily consists of offering financial information to external users such as investors and creditors?

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

Answer: (A)

Verified step by step guidance

1. Understand the purpose of each type of accounting mentioned in the problem. Financial Accounting focuses on providing financial information to external users such as investors and creditors. Cost Accounting deals with analyzing costs within a company. Tax Accounting focuses on compliance with tax laws and regulations. Managerial Accounting provides information for internal decision-making.
2. Identify the key characteristic of Financial Accounting: it is designed to communicate financial performance and position to external stakeholders, such as investors, creditors, and regulatory agencies.
3. Compare the purpose of Financial Accounting with the other types of accounting listed. Note that Cost Accounting, Tax Accounting, and Managerial Accounting primarily serve internal purposes or compliance needs rather than external reporting.
4. Recognize that the question specifically asks about accounting that provides information to external users. This aligns directly with the purpose of Financial Accounting.
5. Conclude that Financial Accounting is the correct answer based on its primary role of offering financial information to external users, as opposed to the other types of accounting listed.