Multiple Choice
Which type of accounting is typically practiced by individuals who maintain a system of records without publishing financial statements to external users?
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1. Introduction to Accounting
Types of Accounting
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In financial accounting, your collection of investments is called your:
A
Balance Sheet
B
Ledger
C
Inventory
D
Portfolio
Verified step by step guidance1
Understand the concept of a portfolio: In financial accounting, a portfolio refers to a collection of investments held by an individual or entity, such as stocks, bonds, mutual funds, or other financial assets.
Differentiate between the given options: A balance sheet is a financial statement that shows the assets, liabilities, and equity of a company at a specific point in time. A ledger is a book or system used to record financial transactions. Inventory refers to goods or materials a business holds for sale or production.
Recognize that none of the other options (Balance Sheet, Ledger, Inventory) describe a collection of investments. Instead, the term 'Portfolio' specifically refers to this concept.
Relate the term 'Portfolio' to investment management: A portfolio is used to track and manage the performance of investments, ensuring alignment with financial goals and risk tolerance.
Conclude that the correct answer is 'Portfolio,' as it directly corresponds to the collection of investments in financial accounting.
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