WGU C213 Accounting for Decision Makers Final Exam Study Guide 2025

Accounting - 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 - the preservation of a systematic, quantitative record of an activity accounting system - used by a business to handle routine bookkeeping tasks and to structure the information so it can be used to evaluate the performance and financial status of the business Accounting information - Info that is intended to be useful in making decisions about the future. The balance sheet, the income statement, and the statement of cashflows - What are the three primary financial statements? External Users - Who is financial accounting information primarily prepared for and used by? Managerial Accounting - the name given to accounting systems designed for internal users Balance Sheet - Reports a company's assets, liabilities, and owners' equity Income Statement - reports the amount of net income earned by a company during a period Net income - the excess of a company's revenues over its expenses 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 FASB - Which private body establishes accounting rules in the U.S.? Financial Accounting Standards Board (FASB) - a private body established and supported by the joint efforts of the U.S. business community, financial analysts, and practicing accountants The Securities and Exchange Commission (SEC) - the organization that regulates U.S. stock exchanges and seeks to create a fair information environment in which investors can buy and sell stocks without fear that companies are hiding or manipulating financial data American Institute of Certified Public Accountants (AICPA) - the professional organization of certified public accountants (CPAs) in the United States Public Company Accounting Oversight Board (PCAOB) - the organization that inspects the audit practices of registered audit firms and has statutory authority to investigate questionable audit practices and to impose sanctions such as barring an audit firm from auditing SEC-registered companies Internal Revenue Service (IRS) - Gov't agency that establishes rules to define exactly when income should be taxed. It has no role in setting financial accounting rules; and a company's financial statements are not used in determining how much tax the company must pay The International Accounting Standards Board (IASB) - Organization that was formed to develop a common set of worldwide accounting standards. Its standards are increasingly accepted worldwide, but FASB rules are still the standard in the United States. 1. Rapid Advancements in the IT field 2. the international integration of worldwide business 3. Increased scrutiny associated with large corporate accounting scandals - Which 3 factors have combined to make right now a time of significant change in accounting? Sarbanes-Oxley Act - A wave of accounting scandals starting in 2001 resulted in this act, which increases U.S. federal government scrutiny of the production of financial statements. Balance Sheet - reports a company's financial position at a specified point in time and lists the company's resources (assets), obligations (liabilities), and net ownership interest (owners' equity). Assets - probable future economic benefits obtained or controlled by a company as a result of past transactions or events Liabilities - probable future sacrifices of economic benefits arising from present obligations of a company to transfer assets or provide services in the future as a result of past transactions or events Owners' equity - the residual interest in the assets of a company that remains after deducting its liabilities Assets = Liabilities + Owners' Equity - What is the accounting equation? By order of liquidity - In what order are assets typically listed on the balance sheet? Current and Long-term - Liabilities are divided into which 2 categories on the balance sheet? states that the financial results of an economic entity should be reported separately from the financial results of other entities, even though all those entities may be controlled by the same person - What is the entity concept? (revenues-expense= net income) - Equation to calculate net income When work has been done and collectability of cash can be reasonably assured - According to accounting rules, when should revenue be recognized? Operating activities - those activities that comprise the day-to-day operations of a business. Investing activities - The purchase and sale of long-term assets such as land and equipment are known as _______________. Financing activities - those activities through which cash is obtained from, or repaid to, creditors and investors information on the accounting assumptions used in preparing the statements and supplemental information not included in the statements themselves - What information do the notes to accounting statements provide?