What type of accounting emphasizes solvency and protects customers and depositors?

Statutory accounting is designed to emphasize solvency and ensure that businesses, particularly in the financial services sector, remain stable enough to meet their obligations to customers and depositors. This approach is governed by regulatory frameworks that require companies to maintain certain levels of capital and reserves, thereby providing a cushion against financial distress.

Statutory accounting principles (SAP) differ from generally accepted accounting principles (GAAP) as they focus more on the ability of a firm to meet its long-term liabilities and ensure funds are available for policyholders and creditors. This emphasis on solvency is crucial for entities such as insurance companies and banks, which have obligations to safeguard their customers' deposits and investments.

In contrast, financial accounting primarily focuses on providing an accurate picture of a company's financial performance through standard reporting practices. Managerial accounting, on the other hand, is more internally focused, aiming to assist management with decision-making rather than ensuring solvency for external stakeholders. Government accounting pertains to the financial transactions and operations of government entities, focusing on compliance and budgetary control rather than the specific solvency needs of clients or depositors.