(L.O. 1) The process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control an organization’s operations is called

a. financial accounting.

b. managerial accounting.

c. tax accounting.

d. auditing.

Approach and Explanation: Define each answer selection. Select the answer item for which your definition matches the stem of the question. Financial accounting is the process that culminates in the preparation of financial reports on the enterprise as a whole for use by parties both internal and external to the enterprise. (Users of these financial reports include investors, creditors, managers, unions, and government agencies.) Managerial accounting is the process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control an organization’s operations. (These reports are only for the use of parties internal to the enterprise.) Tax accounting usually refers to tax planning, advising on tax matters, and/or preparing tax returns. Auditing refers to the examination of financial statements by a certified public accountant in order to express an opinion on their fairness. An auditor attests to the fairness of financial statements and their conformity to generally accepted accounting principles. (Solution = b.)