WGU D196 - PRINCIPLES OF FINANCIAL AND
MANAGERIAL ACCOUNTING QUESTIONS AND
CORRECT ANSWERS
What is the effect of a company's accounting department maintaining high ethical
standards? - Answers - The company's accounting information will increase in value.
Why might employees be interested in their company's financial accounting
information? - Answers - Financial statement data are often used in determining the
employee bonuses.
Which group establishes financial accounting rules in the US? - Answers - Financial
Accounting Standards Board (FASB).
A company paid $5000 cash in advertising costs. How does this transaction affect the
paying company's accounting equation? - Answers - Assets decrease by $5000;
expenses increase by $5000.
What is a transaction? - Answers - Two parties exchanging something of value.
A company borrowed $80,000 cash from a bank. How does this transaction affect the
accounting equation of the borrowing company? - Answers - Assets increase by
$80,000; liabilities increase by $80,000.
What is the impact of expenses on the accounting equation? - Answers - Expenses
decrease owners' equity.
Which type of account are accounts payable and notes payable both examples of? -
Answers - Liability
Whiat is the purpose of the financial accounting cycle? - Answers - To turn information
about transactions into financial statements.
According to the accounting equation, the amount of liabilities and equity must always
be equal to another amount. What is the other amount? - Answers - Assets
What is an expense item? - Answers - Cost of goods sold.
How is gross profit computed? - Answers - Sales (-) COGS
Which type of account is retained earnings? - Answers - Equity
, For the purpose of cash flow classification in the statement of cash flows, what is an
operating activity? - Answers - Paying employees
How does a classified balance sheet provide useful information to a decision maker? -
Answers - It distinguishes between current and long-term assets.
What information does a balance sheet provide to a decision maker? - Answers -
Summary of the financial position of a company at a particular date.
What is an account payable? - Answers - The amount owed by a company that
purchased goods or services from a supplier on credit.
What is an example of a financial cost that would result from poor direct labor budgeting
and planning? - Answers - Increased hiring, training and overtime costs.
What does a manager have control over in a cost center? - Answers - Costs
What should be considered when developing a measure to evaluate the performance of
a manager? - Answers - Only controllable costs
In some companies, the performance measures for profit center managers are heavily
influenced by cost allocations downward from organizational units (such as company
headquarters). Why is this a mistake? - Answers - Uncontrollable costs should not be
included in the performance evaluation measure of a profit center manager.
Which budget should include the expected cost of supplies used by the office staff of
the corporate headquarters? - Answers - Administrative expense budget
Which items are uncontrollable, external variables that make it difficult to forecast the
level of sales? - Answers - Customer tastes and economic conditions
What is the correct sequence of budgets in a manufacturing business? - Answers -
Sales, production, direct materials
Which type of business organization has a major focus on direct materials, direct labor
and overhead? - Answers - Manufacturing
What are the 3 primary functions that company managers use managerial accounting
information for? - Answers - Planning, controlling and evaluating
What is the proper accounting for a product cost? - Answers - Record as an inventory
cost until the item is sold.
How could a period cost be reported in an income statement? - Answers - As an
administrative expense.
MANAGERIAL ACCOUNTING QUESTIONS AND
CORRECT ANSWERS
What is the effect of a company's accounting department maintaining high ethical
standards? - Answers - The company's accounting information will increase in value.
Why might employees be interested in their company's financial accounting
information? - Answers - Financial statement data are often used in determining the
employee bonuses.
Which group establishes financial accounting rules in the US? - Answers - Financial
Accounting Standards Board (FASB).
A company paid $5000 cash in advertising costs. How does this transaction affect the
paying company's accounting equation? - Answers - Assets decrease by $5000;
expenses increase by $5000.
What is a transaction? - Answers - Two parties exchanging something of value.
A company borrowed $80,000 cash from a bank. How does this transaction affect the
accounting equation of the borrowing company? - Answers - Assets increase by
$80,000; liabilities increase by $80,000.
What is the impact of expenses on the accounting equation? - Answers - Expenses
decrease owners' equity.
Which type of account are accounts payable and notes payable both examples of? -
Answers - Liability
Whiat is the purpose of the financial accounting cycle? - Answers - To turn information
about transactions into financial statements.
According to the accounting equation, the amount of liabilities and equity must always
be equal to another amount. What is the other amount? - Answers - Assets
What is an expense item? - Answers - Cost of goods sold.
How is gross profit computed? - Answers - Sales (-) COGS
Which type of account is retained earnings? - Answers - Equity
, For the purpose of cash flow classification in the statement of cash flows, what is an
operating activity? - Answers - Paying employees
How does a classified balance sheet provide useful information to a decision maker? -
Answers - It distinguishes between current and long-term assets.
What information does a balance sheet provide to a decision maker? - Answers -
Summary of the financial position of a company at a particular date.
What is an account payable? - Answers - The amount owed by a company that
purchased goods or services from a supplier on credit.
What is an example of a financial cost that would result from poor direct labor budgeting
and planning? - Answers - Increased hiring, training and overtime costs.
What does a manager have control over in a cost center? - Answers - Costs
What should be considered when developing a measure to evaluate the performance of
a manager? - Answers - Only controllable costs
In some companies, the performance measures for profit center managers are heavily
influenced by cost allocations downward from organizational units (such as company
headquarters). Why is this a mistake? - Answers - Uncontrollable costs should not be
included in the performance evaluation measure of a profit center manager.
Which budget should include the expected cost of supplies used by the office staff of
the corporate headquarters? - Answers - Administrative expense budget
Which items are uncontrollable, external variables that make it difficult to forecast the
level of sales? - Answers - Customer tastes and economic conditions
What is the correct sequence of budgets in a manufacturing business? - Answers -
Sales, production, direct materials
Which type of business organization has a major focus on direct materials, direct labor
and overhead? - Answers - Manufacturing
What are the 3 primary functions that company managers use managerial accounting
information for? - Answers - Planning, controlling and evaluating
What is the proper accounting for a product cost? - Answers - Record as an inventory
cost until the item is sold.
How could a period cost be reported in an income statement? - Answers - As an
administrative expense.
