WGU c213 study guide
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
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
