Which type of accounting accounts for assets and liabilities?

• A. Managerial
• B. Financial
• C. Budgetary
• D. Cost

Answer: (B)

Financial accounting focuses on recording, summarizing, and reporting the financial position of an organization, including assets and liabilities, for external stakeholders. It tracks what the company owns and what it owes and presents this information in standardized statements like the balance sheet, which lists assets and liabilities, along with equity. This external, rule-governed reporting is what makes financial accounting the standard method for accounting for assets and liabilities. Managerial accounting is about internal decision making and does not require external standards, budgetary accounting centers on tracking actuals against budgets, and cost accounting concentrates on the costs of producing goods and services for internal control and pricing.