Which of the following best describes the primary focus of financial accounting as compared to managerial accounting?

• A. Providing information to external users such as investors and creditors
• B. Auditing internal controls and operational efficiency
• C. Preparing tax returns and ensuring compliance with tax laws
• D. Assisting internal management in decision-making and planning

Answer: (A)

Verified step by step guidance

1. Understand the distinction between financial accounting and managerial accounting. Financial accounting focuses on providing information to external users, while managerial accounting is aimed at internal users for decision-making and planning.
2. Identify the primary users of financial accounting information. These are external stakeholders such as investors, creditors, and regulatory agencies.
3. Recognize the purpose of financial accounting. It is designed to present a clear and standardized view of a company's financial performance and position through financial statements like the income statement, balance sheet, and cash flow statement.
4. Compare the options provided in the question. Eliminate choices that pertain to managerial accounting (e.g., assisting internal management) or other specialized areas like auditing or tax compliance.
5. Select the option that aligns with the primary focus of financial accounting, which is providing information to external users such as investors and creditors.