Which of the following statements about types of accounting is true?

• A. Tax accounting is used to prepare financial statements for external investors.
• B. Cost accounting is only used for preparing tax returns.
• C. Financial accounting is primarily concerned with budgeting and forecasting for internal management.
• D. Managerial accounting focuses on providing information to internal users for decision-making.

Answer: (D)

Verified step by step guidance

1. Understand the different types of accounting mentioned in the problem: Tax accounting, Cost accounting, Financial accounting, and Managerial accounting.
2. Tax accounting focuses on compliance with tax laws and regulations, ensuring accurate preparation of tax returns and reporting to tax authorities. It is not used to prepare financial statements for external investors.
3. Cost accounting is primarily concerned with analyzing and controlling costs within an organization. It is not limited to preparing tax returns; it helps in decision-making related to cost efficiency and profitability.
4. Financial accounting is focused on preparing financial statements (e.g., income statement, balance sheet, cash flow statement) for external users such as investors, creditors, and regulatory agencies. It is not primarily concerned with budgeting and forecasting for internal management.
5. Managerial accounting is designed to provide information to internal users, such as managers, to assist in decision-making, planning, and controlling operations. This aligns with the correct answer provided in the problem.