WGU C213 ACCOUNTING FOR DECISION MAKERS FINAL EXAM STUDY GUIDE QUESTIONS AND CORRECT ANSWERS COMPLETE ALL 11 CHAPTERS QUESTIONS AND ANSWERS

Chapter 1: Nature and Purpose of Accounting Describe the purpose of accounting. Accounting is the recording of the day-to-day financial activities of a company and the organization of that information into summary reports used to evaluate the company's financial status. Bookkeeping is a part of accounting. Bookkeeping refers to the process of recording transactions into various accounts, which is the first step in accounting. The next step is to analyze the accounts and organize them into financial statements and other useful reports. (Reference topic 1.1) Describe the three financial statements. The balance sheet reports a company's assets, liabilities, and owners' equity. It reports the financial position of a firm at a point in time. The income statement reports the amount of net income earned by a company during a period. Net income is the excess of a company's revenues over its expenses. It reports the financial performance of a firm over a period of time. The statement of cash flows reports the amount of cash collected and paid out by a company in the following three types of activities: operating, investing, and financing over a period of time. (Reference topic 1.2) Identify users of financial statements for a particular situation. Lenders Banks use companies' financial statements in making decisions about commercial loans. The financial statements are useful because they help the lender predict the future ability of the borrower to repay the loan.