Which type of accounting primarily deals with recording and reporting transactions related to agreements or contracts that establish a schedule of payments, such as credit sales?

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

Answer: (B)

Verified step by step guidance

1. Understand the context of the question: It is asking about the type of accounting that records and reports transactions related to agreements or contracts with scheduled payments, such as credit sales.
2. Review the definitions of the accounting types provided: Financial Accounting, Accrual Accounting, Managerial Accounting, and Tax Accounting.
3. Focus on Accrual Accounting: This method records revenues and expenses when they are incurred, regardless of when cash is exchanged. For example, credit sales are recorded as revenue when the sale occurs, not when payment is received.
4. Compare Accrual Accounting to other types: Financial Accounting focuses on preparing financial statements for external users, Managerial Accounting is for internal decision-making, and Tax Accounting deals with compliance with tax laws. None of these specifically emphasize the timing of revenue and expense recognition like Accrual Accounting does.
5. Conclude that Accrual Accounting is the correct answer because it is designed to handle transactions based on agreements or contracts with scheduled payments, such as credit sales.