Which of the following is a type of accounting that primarily focuses on recording, classifying, and summarizing financial transactions for external reporting purposes?

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

Answer: (D)

Verified step by step guidance

1. Understand the different types of accounting mentioned in the problem: Tax Accounting, Cost Accounting, Managerial Accounting, and Financial Accounting.
2. Tax Accounting focuses on preparing tax returns and ensuring compliance with tax laws. It is primarily concerned with tax-related matters rather than external reporting.
3. Cost Accounting deals with analyzing and tracking costs within an organization to aid in internal decision-making. It is not focused on external reporting.
4. Managerial Accounting provides information to internal stakeholders, such as managers, to assist in planning, controlling, and decision-making. It is not intended for external reporting.
5. Financial Accounting is the type of accounting that focuses on recording, classifying, and summarizing financial transactions to prepare financial statements for external stakeholders, such as investors, creditors, and regulatory agencies. This matches the description in the problem.