1
Intermediate Accounting 1 (WGU)
Questions and Correct Answers
Characteristics of Accounting
Ans✅✅: the identification, measurement, and communication of
financial information about economic entities to interested parties
Financial Accounting
Ans✅✅: Preparation of finanical reports
Managerial Accounting
Ans✅✅: using financial information to plan, control, and evaluate a
company's operations
Financial Statements
Ans✅✅: 1. Balance Sheet
2. Income Statement
2. Statement of Retained Earnings (owner's equity)
4. Statement of Cash Flows
Financial Reports
Ans✅✅: 1. President's Letter
2. Prospectuses
3. News Releases
4. Management Forecasts
5. Impact Statements (social or environmental)
Capital Allocation
Pretest - Stuvia US
,2
Ans✅✅: 1. Resources are limited
2. Effective process of capital allocation is critical to a healthy
economy
3. Promotes productivity, encourages innovations, and provides an
efficient and liquid market for buying and selling securities
Objective of Financial Reporting
Ans✅✅: to provide financial information about the reporting entity
that is useful to present and potential equity investors, lenders, and
other creditors in decisions about providing resources to the entity
General-Purpose Financial Statements
Ans✅✅: 1. provide financial reporting information to a wide variety
of users
2. most useful information
3. cost-effective
Equity Investors and Creditors
Ans✅✅: 1. primary users for general purpose financial statements
2. Statements used to determine ability to generate net cash flows and to
understand management's ability to protect and enhance assets
Entity Perspective
Ans✅✅: companies viewed as separate and distinct from their owners
Decision-Usefulness
Ans✅✅: 1. Approach that requires that financial reporting be useful
to investors by helping them assess (1) the company's ability to generate
net cash inflows and (2) management's ability to protect and enhance the
capital providers' investments.
Accrual Basis of Accounting
Pretest - Stuvia US
, 3
Ans✅✅: 1. the method of accounting that recognizes revenue when it is
earned and matches expenses to the revenues they helped produce
2. ability to generate favorable cash flows
Need to Develop Standards
Ans✅✅: 1. Generally Accepted Accounting Principles (GAAP)
2. allows for commonality of financial statements so they can be read
from one company to another
Generally Accepted
Ans✅✅: 1. authoritative accounting rule-making body established a
principle of reporting in an area
OR
2. over time a given practice has been accepted as appropriate because of
its universal uses or application
Parties Involved in Standard Setting
Ans✅✅: 1. Securities and Exchange Commission (SEC)
2. American Institute of Certified Public Accountants (AICPA)
3. Financial Accounting Standards Board (FASB)
Securities and Exchange Commission (SEC)
Ans✅✅: 1. develop and standardize financial information presented to
stockholders
2. relies on the Financial Accounting Standards Board (FASB)
American Institute of Certified Public Accountants (AICPA)
Pretest - Stuvia US
Intermediate Accounting 1 (WGU)
Questions and Correct Answers
Characteristics of Accounting
Ans✅✅: the identification, measurement, and communication of
financial information about economic entities to interested parties
Financial Accounting
Ans✅✅: Preparation of finanical reports
Managerial Accounting
Ans✅✅: using financial information to plan, control, and evaluate a
company's operations
Financial Statements
Ans✅✅: 1. Balance Sheet
2. Income Statement
2. Statement of Retained Earnings (owner's equity)
4. Statement of Cash Flows
Financial Reports
Ans✅✅: 1. President's Letter
2. Prospectuses
3. News Releases
4. Management Forecasts
5. Impact Statements (social or environmental)
Capital Allocation
Pretest - Stuvia US
,2
Ans✅✅: 1. Resources are limited
2. Effective process of capital allocation is critical to a healthy
economy
3. Promotes productivity, encourages innovations, and provides an
efficient and liquid market for buying and selling securities
Objective of Financial Reporting
Ans✅✅: to provide financial information about the reporting entity
that is useful to present and potential equity investors, lenders, and
other creditors in decisions about providing resources to the entity
General-Purpose Financial Statements
Ans✅✅: 1. provide financial reporting information to a wide variety
of users
2. most useful information
3. cost-effective
Equity Investors and Creditors
Ans✅✅: 1. primary users for general purpose financial statements
2. Statements used to determine ability to generate net cash flows and to
understand management's ability to protect and enhance assets
Entity Perspective
Ans✅✅: companies viewed as separate and distinct from their owners
Decision-Usefulness
Ans✅✅: 1. Approach that requires that financial reporting be useful
to investors by helping them assess (1) the company's ability to generate
net cash inflows and (2) management's ability to protect and enhance the
capital providers' investments.
Accrual Basis of Accounting
Pretest - Stuvia US
, 3
Ans✅✅: 1. the method of accounting that recognizes revenue when it is
earned and matches expenses to the revenues they helped produce
2. ability to generate favorable cash flows
Need to Develop Standards
Ans✅✅: 1. Generally Accepted Accounting Principles (GAAP)
2. allows for commonality of financial statements so they can be read
from one company to another
Generally Accepted
Ans✅✅: 1. authoritative accounting rule-making body established a
principle of reporting in an area
OR
2. over time a given practice has been accepted as appropriate because of
its universal uses or application
Parties Involved in Standard Setting
Ans✅✅: 1. Securities and Exchange Commission (SEC)
2. American Institute of Certified Public Accountants (AICPA)
3. Financial Accounting Standards Board (FASB)
Securities and Exchange Commission (SEC)
Ans✅✅: 1. develop and standardize financial information presented to
stockholders
2. relies on the Financial Accounting Standards Board (FASB)
American Institute of Certified Public Accountants (AICPA)
Pretest - Stuvia US
