WGU c213 study guide UPDATED ACTUAL
Exam Questions and CORRECT Answers
purpose of accounting - CORRECT ANSWER 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)
The balance sheet - CORRECT ANSWER reports a company's assets, liabilities, and owners'
equity. It reports the financial position of a firm at a point in time.
income statement - CORRECT ANSWER 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.
statement of cash flows - CORRECT ANSWER 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)
Fin Statement Users: Lenders - CORRECT ANSWER 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.
Fin Statement Users: Investors - CORRECT ANSWER Investors want information to help
them estimate how much cash they can expect to directly receive from the business in the future
if they invest in it now.
Fin Statement Users: Company Management - CORRECT ANSWER Managers use financial
accounting data to formulate company goals, to compute bonuses for employees, and to
illuminate company weaknesses.
,Fin Statement Users: Suppliers and Customers - CORRECT ANSWER Suppliers, customers,
and employees use financial statements to tell them about the long-run prospects of a company.
Fin Statement Users: Employees - CORRECT ANSWER Financial statement data, as
mentioned earlier, are used in determining employee bonuses. In addition, financial accounting
information can help an employee evaluate the employer's ability to fulfill its long-run promises,
such as for pensions and retiree health care benefits. Financial statements are also important in
contract negotiations between labor and management.
Fin Statement Users: Competitors - CORRECT ANSWER Competitors use financial
accounting information to reveal strategic opportunities within their industry.
Government Agencies - CORRECT ANSWER Government agencies use financial statement
data to bolster political and regulatory positions for and against companies.
Fin Statement Users: The Press - CORRECT ANSWER Reporters use financial accounting
data as background information and to indicate which companies are undergoing significant
changes in financial status. (Reference Topic 1.3)
Fin Statement Users: Politicians - CORRECT ANSWER Politicians use financial statement
data to bolster political and regulatory positions for and against companies.
Acct Rules: Financial Accountings Standards Board (FASB) - CORRECT ANSWER sets
accounting rules for the private section in the U.S.. It is a private, non-profit body established
and supported by the joint efforts of the U.S. business community, financial analysts, and
practicing accountants.
The FASB has no legal power to enforce the accounting standards it sets but maintains its
influence by carefully protecting its prestige and reputation. The standards it sets are called
Generally Accepted Accounting Standards (GAAP). These are a common set of accounting
principles, standards, and procedures that companies must follow when they compile their
financial statements. (Reference Topic 1.4)
, Acct Rules: Securities and Exchange Commission (SEC) - CORRECT ANSWER has the
legal authority to set accounting rules, but has deferred that responsibility to the FASB in most
cases. The SEC 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 who sell
stocks to the general public are hiding or manipulating financial data. (Reference topic 1.5)
Acct Org: CPA Accreditation - CORRECT ANSWER The American Institute of Certified
Public Accountants (AICPA) is the professional organization of certified public accountants
(CPAs) in the United States. A CPA is someone who has taken a minimum number of college-
level accounting classes, has passed the CPA exam, and has met other requirements set by his or
her state. A CPA firm is a company that provides freelance business advice, particularly in
connection with accounting issues and executes the vast majority of external audits in the US.
The AICPA sets ethical standards for CPAs, provides continuing education for them, writes and
grades the CPA exam, lobbies for legislation favored by CPAs, and provides other support to
CPAs. Its oversight of the CPA exam is its main role in accreditation. However, to be accredited
as a CPA you must meet the requirements of the state in which you plan to practice. The
requirements for each state are set by that state's legislature and overseen by that state's Board of
Accountancy, which is a state agency. (Reference Topic 1.5)
Acct Org: Public Company Accounting Oversight Board (PCAOB) - CORRECT
ANSWER determines who can audit public companies regardless of whether the audit firm is
accredited by a state Board of Accountancy. Thus, they accredit firms that can audit public
companies.
Current Trends changing Accounting: Globalization - CORRECT ANSWER As more and
more business do business globally, capital flows more freely across national boundaries. This
means investors can choose to invest in firms all over the planet. To help them make investment
decisions, the global accounting and regulatory communities are working to bring accounting
standards around the world into agreement the IASB was one step in that direction, but nations
still control the accounting standards used within their borders and so much of the
standardization is being done through voluntary cooperation
Current Trends changing Accounting: Technology - CORRECT ANSWER Information
technology has speeded up the pace with which accounting data and reports are produced and
dramatically increased the volume of accounting information that firms can provide to investors.
(Reference Topic 1.6)
Exam Questions and CORRECT Answers
purpose of accounting - CORRECT ANSWER 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)
The balance sheet - CORRECT ANSWER reports a company's assets, liabilities, and owners'
equity. It reports the financial position of a firm at a point in time.
income statement - CORRECT ANSWER 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.
statement of cash flows - CORRECT ANSWER 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)
Fin Statement Users: Lenders - CORRECT ANSWER 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.
Fin Statement Users: Investors - CORRECT ANSWER Investors want information to help
them estimate how much cash they can expect to directly receive from the business in the future
if they invest in it now.
Fin Statement Users: Company Management - CORRECT ANSWER Managers use financial
accounting data to formulate company goals, to compute bonuses for employees, and to
illuminate company weaknesses.
,Fin Statement Users: Suppliers and Customers - CORRECT ANSWER Suppliers, customers,
and employees use financial statements to tell them about the long-run prospects of a company.
Fin Statement Users: Employees - CORRECT ANSWER Financial statement data, as
mentioned earlier, are used in determining employee bonuses. In addition, financial accounting
information can help an employee evaluate the employer's ability to fulfill its long-run promises,
such as for pensions and retiree health care benefits. Financial statements are also important in
contract negotiations between labor and management.
Fin Statement Users: Competitors - CORRECT ANSWER Competitors use financial
accounting information to reveal strategic opportunities within their industry.
Government Agencies - CORRECT ANSWER Government agencies use financial statement
data to bolster political and regulatory positions for and against companies.
Fin Statement Users: The Press - CORRECT ANSWER Reporters use financial accounting
data as background information and to indicate which companies are undergoing significant
changes in financial status. (Reference Topic 1.3)
Fin Statement Users: Politicians - CORRECT ANSWER Politicians use financial statement
data to bolster political and regulatory positions for and against companies.
Acct Rules: Financial Accountings Standards Board (FASB) - CORRECT ANSWER sets
accounting rules for the private section in the U.S.. It is a private, non-profit body established
and supported by the joint efforts of the U.S. business community, financial analysts, and
practicing accountants.
The FASB has no legal power to enforce the accounting standards it sets but maintains its
influence by carefully protecting its prestige and reputation. The standards it sets are called
Generally Accepted Accounting Standards (GAAP). These are a common set of accounting
principles, standards, and procedures that companies must follow when they compile their
financial statements. (Reference Topic 1.4)
, Acct Rules: Securities and Exchange Commission (SEC) - CORRECT ANSWER has the
legal authority to set accounting rules, but has deferred that responsibility to the FASB in most
cases. The SEC 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 who sell
stocks to the general public are hiding or manipulating financial data. (Reference topic 1.5)
Acct Org: CPA Accreditation - CORRECT ANSWER The American Institute of Certified
Public Accountants (AICPA) is the professional organization of certified public accountants
(CPAs) in the United States. A CPA is someone who has taken a minimum number of college-
level accounting classes, has passed the CPA exam, and has met other requirements set by his or
her state. A CPA firm is a company that provides freelance business advice, particularly in
connection with accounting issues and executes the vast majority of external audits in the US.
The AICPA sets ethical standards for CPAs, provides continuing education for them, writes and
grades the CPA exam, lobbies for legislation favored by CPAs, and provides other support to
CPAs. Its oversight of the CPA exam is its main role in accreditation. However, to be accredited
as a CPA you must meet the requirements of the state in which you plan to practice. The
requirements for each state are set by that state's legislature and overseen by that state's Board of
Accountancy, which is a state agency. (Reference Topic 1.5)
Acct Org: Public Company Accounting Oversight Board (PCAOB) - CORRECT
ANSWER determines who can audit public companies regardless of whether the audit firm is
accredited by a state Board of Accountancy. Thus, they accredit firms that can audit public
companies.
Current Trends changing Accounting: Globalization - CORRECT ANSWER As more and
more business do business globally, capital flows more freely across national boundaries. This
means investors can choose to invest in firms all over the planet. To help them make investment
decisions, the global accounting and regulatory communities are working to bring accounting
standards around the world into agreement the IASB was one step in that direction, but nations
still control the accounting standards used within their borders and so much of the
standardization is being done through voluntary cooperation
Current Trends changing Accounting: Technology - CORRECT ANSWER Information
technology has speeded up the pace with which accounting data and reports are produced and
dramatically increased the volume of accounting information that firms can provide to investors.
(Reference Topic 1.6)
