Tom has a qualified retirement plan. Under which type of accounting would the contributions to this plan most likely be recorded and reported?

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

Answer: (C)

Verified step by step guidance

1. Understand the context of the problem: Tom has a qualified retirement plan, and the question is asking under which type of accounting the contributions to this plan would be recorded and reported.
2. Review the definitions of the accounting types mentioned: Managerial accounting focuses on internal decision-making, Tax accounting deals with compliance with tax laws, Cost accounting analyzes costs for production and operations, and Financial accounting involves recording, summarizing, and reporting financial transactions for external stakeholders.
3. Identify the nature of the contributions to the retirement plan: Contributions to a qualified retirement plan are financial transactions that need to be recorded and reported for external purposes, such as compliance with regulations and providing information to stakeholders.
4. Match the nature of the transaction to the appropriate accounting type: Since the contributions are financial transactions that need to be reported externally, they fall under Financial accounting.
5. Conclude that Financial accounting is the correct type for recording and reporting contributions to Tom's qualified retirement plan, as it aligns with the purpose of external reporting and compliance.