Which type of accounting provides information primarily for individuals who invest in a business?

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

Answer: (D)

Verified step by step guidance

1. Understand the purpose of each type of accounting: Managerial accounting focuses on internal decision-making, Cost accounting deals with cost analysis, Tax accounting ensures compliance with tax laws, and Financial accounting provides information for external stakeholders like investors.
2. Recognize that individuals who invest in a business are external stakeholders. They need information about the financial health and performance of the business to make informed decisions.
3. Learn that Financial accounting is designed to produce financial statements such as the balance sheet, income statement, and cash flow statement, which are used by external parties including investors, creditors, and regulators.
4. Understand that Financial accounting adheres to standardized principles like GAAP (Generally Accepted Accounting Principles) or IFRS (International Financial Reporting Standards) to ensure consistency and comparability of financial information.
5. Conclude that Financial accounting is the type of accounting that primarily provides information for individuals who invest in a business, as it focuses on external reporting and transparency.