Which type of accounting is primarily concerned with providing information to external users such as investors and creditors?

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

Answer: (B)

Verified step by step guidance

1. Understand the purpose of each type of accounting mentioned in the problem: Managerial accounting focuses on internal decision-making, Cost accounting deals with cost analysis and control, Tax accounting is concerned with tax compliance and planning, and Financial accounting provides information to external users.
2. Identify the key phrase in the question: 'providing information to external users such as investors and creditors.' This is a critical clue to determine the correct type of accounting.
3. Recall that Financial accounting is designed to prepare financial statements (e.g., income statement, balance sheet, cash flow statement) that are used by external parties like investors, creditors, and regulatory agencies.
4. Compare the purpose of Financial accounting with the needs of external users mentioned in the question. Financial accounting aligns directly with the goal of providing standardized and reliable information to external stakeholders.
5. Conclude that the correct answer is Financial accounting, as it matches the description provided in the question.