Which of the following best describes accounting?

• A. A process limited to preparing tax returns for individuals and corporations.
• B. A system used exclusively for tracking inventory levels in a company.
• C. A method for managing only cash transactions within a business.
• D. A systematic process of recording, classifying, and summarizing financial transactions to provide useful information for decision-making.

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the definition of accounting. Accounting is a systematic process that involves recording, classifying, and summarizing financial transactions to provide useful information for decision-making.
2. Step 2: Analyze the options provided in the question. Each option describes a different aspect of financial activities, but only one aligns with the comprehensive definition of accounting.
3. Step 3: Eliminate incorrect options. For example, preparing tax returns, tracking inventory, and managing cash transactions are specific tasks within accounting but do not encompass the full scope of the process.
4. Step 4: Identify the correct option that matches the definition of accounting. The correct answer should reflect the systematic process of recording, classifying, and summarizing financial transactions.
5. Step 5: Confirm that the chosen answer aligns with the purpose of accounting, which is to provide useful information for decision-making in a business context.