Which of the following best describes financial accounting?

• A. The analysis of costs associated with producing goods or services within an organization.
• B. The process of recording, summarizing, and reporting a company's financial transactions to external users.
• C. The preparation of tax returns and planning for future tax obligations.
• D. The evaluation of investment opportunities for personal financial planning.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the definition of financial accounting. Financial accounting is primarily concerned with recording, summarizing, and reporting a company's financial transactions to external users such as investors, creditors, and regulatory agencies.
2. Step 2: Compare the options provided in the question. Analyze each option to determine which one aligns with the definition of financial accounting.
3. Step 3: Option 1 describes cost analysis, which is related to managerial accounting rather than financial accounting. Managerial accounting focuses on internal decision-making processes.
4. Step 4: Option 3 refers to tax preparation and planning, which falls under the domain of tax accounting, not financial accounting.
5. Step 5: Option 4 involves evaluating investment opportunities for personal financial planning, which is unrelated to financial accounting. The correct answer is Option 2, as it matches the definition of financial accounting.