Which of the following is a primary focus of financial accounting?

• A. Calculating tax liabilities for government reporting
• B. Providing information to external users such as investors and creditors
• C. Auditing the financial statements of other companies
• D. Preparing detailed internal reports for management decision-making

Answer: (B)

Verified step by step guidance

1. Understand the purpose of financial accounting: Financial accounting is primarily concerned with providing information to external users, such as investors, creditors, and regulatory agencies, to help them make informed decisions.
2. Differentiate financial accounting from other accounting types: Financial accounting focuses on external reporting, while managerial accounting is used for internal decision-making, and tax accounting deals with calculating tax liabilities.
3. Review the options provided: Analyze each option to determine which aligns with the primary focus of financial accounting. For example, calculating tax liabilities is related to tax accounting, and preparing internal reports is part of managerial accounting.
4. Identify the correct focus: The correct focus of financial accounting is providing information to external users, such as investors and creditors, through financial statements like the balance sheet, income statement, and cash flow statement.
5. Conclude the reasoning: Based on the analysis, the correct answer is the option that states 'Providing information to external users such as investors and creditors,' as this aligns with the primary purpose of financial accounting.