If a settlement option is not chosen by the beneficiary or policy owner, which type of accounting would most likely be responsible for recording the default payment method selected by the insurance company?

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

Answer: (C)

Verified step by step guidance

1. Understand the context of the problem: The question is asking which type of accounting is responsible for recording the default payment method selected by the insurance company when no settlement option is chosen by the beneficiary or policy owner.
2. Review the definitions of the accounting types mentioned: Cost accounting focuses on tracking and analyzing costs within a company, Managerial accounting is used for internal decision-making, Tax accounting deals with compliance with tax laws, and Financial accounting is concerned with recording, summarizing, and reporting financial transactions to external parties.
3. Identify the nature of the transaction: The default payment method selected by the insurance company is a financial transaction that needs to be recorded and reported in the company's financial statements.
4. Determine the appropriate accounting type: Since the transaction involves recording and reporting financial data for external purposes, it falls under the scope of Financial Accounting.
5. Conclude that Financial Accounting is the correct answer because it is responsible for recording and reporting financial transactions, including default payment methods selected by the insurance company.