What is the primary goal of financial accounting?

The primary goal of financial accounting is to create a clear and accurate representation of an organization's financial performance and position through financial statements. This information is essential for external users such as investors, creditors, regulators, and other stakeholders who rely on these documents to make informed decisions about their engagement with the organization.

Financial accounting ensures that businesses comply with the set standards and regulations, such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). This compliance not only promotes transparency and accountability but also enhances the credibility of the financial statements.

The other areas mentioned, such as internal decision-making, preparing budgets, and tax planning, are more aligned with managerial accounting. Managerial accounting focuses on providing information for internal stakeholders to facilitate strategic planning and operational decisions, rather than aiming primarily at external reporting and compliance factors essential to financial accounting.