WGU C213 PA & OA STUDY GUIDE #2
QUESTIONS & ELABORATED
ANSWERS PASSED ALREADY
GRADED A+
Which of the following is the most correct definition of accounting? - Correct Answer ✔✔
A system for providing quantitative information, primarily financial in nature, about
economic entities that is intended to be useful in making economic decisions
What is NOT typically true of accounting information? - Correct Answer ✔✔ The
information relates to future time periods.
Which is NOT a key component of the definition of accounting? - Correct Answer ✔✔
Qualitative
What is true about the double-entry system of bookkeeping? - Correct Answer ✔✔ It
was developed in the 1300s−1400s in Italy.
Businesses use accounting systems to? - Correct Answer ✔✔ Analyze transactions;
Handle routine bookkeeping tasks; Evaluate performance and health of the business.
What is not a function of accounting? - Correct Answer ✔✔ Executing sales
transactions for organizations
What is NOT one of the three primary financial statements? - Correct Answer ✔✔
Statement of retained earnings
Generally accepted accounting principles are? - Correct Answer ✔✔ Developed by
accounting rule makers
The initials GAAP stand for? - Correct Answer ✔✔ Generally Accepted Accounting
Principles
Which is NOT a service typically provided by large public accounting firms? - Correct
Answer ✔✔ Making management decisions
The organization that develops worldwide accounting standards is the? - Correct
Answer ✔✔ International Accounting Standards Board (IASB)
The initials CPA stand for? - Correct Answer ✔✔ Certified Public Accountant
,Which of the following financial statements reports a company's resources, obligations,
and owner's equity? - Correct Answer ✔✔ Balance sheet
Which of the following financial statements reports the excess of a company's revenues
over its expenses? - Correct Answer ✔✔ Income statement
Which of the following financial statements reports the amount of cash collected and
paid out by a company? - Correct Answer ✔✔ Statement of cash flows
The emphasis in financial accounting is on which of the following external user groups?
- Correct Answer ✔✔ Investors and creditors
The primary internal group that uses accounting information is? - Correct Answer ✔✔
Management
Internal reports are generally used by? - Correct Answer ✔✔ Management
Which of the following is NOT an external user of financial information? - Correct
Answer ✔✔ Management
Which of the following is NOT true of the Financial Accounting Standards Board
(FASB)? - Correct Answer ✔✔ It is a government agency
Generally accepted accounting principles are? - Correct Answer ✔✔ Developed by
accounting rule makers
The current standard-setting board for accounting in the private sector is the? - Correct
Answer ✔✔ Financial Accounting Standards Board (FASB)
Which of the following organizations has specific legal authority to establish accounting
standards for publicly held companies? - Correct Answer ✔✔ Securities and Exchange
Commission (SEC)
Which of the following is NOT a service typically provided by large public accounting
firms? - Correct Answer ✔✔ Making management decisions
The initials CPA stand for? - Correct Answer ✔✔ Certified Public Accountant
Standards established by the International Accounting Standards Board are referred to
as? - Correct Answer ✔✔ International Financial Accounting Standards
Which of the following is NOT a reason for the integration of worldwide accounting
standards? - Correct Answer ✔✔ the theoretical necessity of a common set of
accounting standards
, Increased federal oversight of the audit process resulted from the passage of the
following act of Congress? - Correct Answer ✔✔ Sarbanes-Oxley Act
What does it mean if a company has a debt ratio of 101.5%? - Correct Answer ✔✔ The
company has 1.5% more total liabilities than total assets.
What is consistent with a continual decline in gross profit if the firm's cost of goods sold
remains the same? - Correct Answer ✔✔ Continual decrease in sales
Which two cash flow adequacy ratios represent a cash cow? - Correct Answer ✔✔
$6,991/$5,486 & $5,220/$1,875
What two items of information are revealed on the balance sheet? - Correct Answer ✔✔
Ownership & Debt
Which term is defined as the residual interest in the net assets of a company? - Correct
Answer ✔✔ Owners' equity
A corporation has total liabilities of $300 million, total owners' equity of $100 million, and
current assets of $50 million. What is the value of the firm's long-term assets? - Correct
Answer ✔✔ $350 million
Which situation should result in revenue recognition on the income statement for the
year ending 12/31/14 if the firm is using accrual-basis accounting? - Correct Answer
✔✔ In 2014, a company provides services to a customer for which cash will be
collected the next year (2015).
Which category on the statement of cash flows summarizes cash receipts and
payments to owners and creditors of the company? - Correct Answer ✔✔ Cash flows
from financing activities
Cash flows from financing activities? - Correct Answer ✔✔ In the notes to financial
statements
Which assurance does an external audit report provide for its readers? - Correct Answer
✔✔ The company's financial statements fairly reflect its financial position
Information that can be verified? - Correct Answer ✔✔ Reliable
Information having to do with the matter at hand? - Correct Answer ✔✔ Relevant
Information that is important enough to make a difference? - Correct Answer ✔✔
Material
Information related to recognizing losses as they occur? - Correct Answer ✔✔
Conservatism
QUESTIONS & ELABORATED
ANSWERS PASSED ALREADY
GRADED A+
Which of the following is the most correct definition of accounting? - Correct Answer ✔✔
A system for providing quantitative information, primarily financial in nature, about
economic entities that is intended to be useful in making economic decisions
What is NOT typically true of accounting information? - Correct Answer ✔✔ The
information relates to future time periods.
Which is NOT a key component of the definition of accounting? - Correct Answer ✔✔
Qualitative
What is true about the double-entry system of bookkeeping? - Correct Answer ✔✔ It
was developed in the 1300s−1400s in Italy.
Businesses use accounting systems to? - Correct Answer ✔✔ Analyze transactions;
Handle routine bookkeeping tasks; Evaluate performance and health of the business.
What is not a function of accounting? - Correct Answer ✔✔ Executing sales
transactions for organizations
What is NOT one of the three primary financial statements? - Correct Answer ✔✔
Statement of retained earnings
Generally accepted accounting principles are? - Correct Answer ✔✔ Developed by
accounting rule makers
The initials GAAP stand for? - Correct Answer ✔✔ Generally Accepted Accounting
Principles
Which is NOT a service typically provided by large public accounting firms? - Correct
Answer ✔✔ Making management decisions
The organization that develops worldwide accounting standards is the? - Correct
Answer ✔✔ International Accounting Standards Board (IASB)
The initials CPA stand for? - Correct Answer ✔✔ Certified Public Accountant
,Which of the following financial statements reports a company's resources, obligations,
and owner's equity? - Correct Answer ✔✔ Balance sheet
Which of the following financial statements reports the excess of a company's revenues
over its expenses? - Correct Answer ✔✔ Income statement
Which of the following financial statements reports the amount of cash collected and
paid out by a company? - Correct Answer ✔✔ Statement of cash flows
The emphasis in financial accounting is on which of the following external user groups?
- Correct Answer ✔✔ Investors and creditors
The primary internal group that uses accounting information is? - Correct Answer ✔✔
Management
Internal reports are generally used by? - Correct Answer ✔✔ Management
Which of the following is NOT an external user of financial information? - Correct
Answer ✔✔ Management
Which of the following is NOT true of the Financial Accounting Standards Board
(FASB)? - Correct Answer ✔✔ It is a government agency
Generally accepted accounting principles are? - Correct Answer ✔✔ Developed by
accounting rule makers
The current standard-setting board for accounting in the private sector is the? - Correct
Answer ✔✔ Financial Accounting Standards Board (FASB)
Which of the following organizations has specific legal authority to establish accounting
standards for publicly held companies? - Correct Answer ✔✔ Securities and Exchange
Commission (SEC)
Which of the following is NOT a service typically provided by large public accounting
firms? - Correct Answer ✔✔ Making management decisions
The initials CPA stand for? - Correct Answer ✔✔ Certified Public Accountant
Standards established by the International Accounting Standards Board are referred to
as? - Correct Answer ✔✔ International Financial Accounting Standards
Which of the following is NOT a reason for the integration of worldwide accounting
standards? - Correct Answer ✔✔ the theoretical necessity of a common set of
accounting standards
, Increased federal oversight of the audit process resulted from the passage of the
following act of Congress? - Correct Answer ✔✔ Sarbanes-Oxley Act
What does it mean if a company has a debt ratio of 101.5%? - Correct Answer ✔✔ The
company has 1.5% more total liabilities than total assets.
What is consistent with a continual decline in gross profit if the firm's cost of goods sold
remains the same? - Correct Answer ✔✔ Continual decrease in sales
Which two cash flow adequacy ratios represent a cash cow? - Correct Answer ✔✔
$6,991/$5,486 & $5,220/$1,875
What two items of information are revealed on the balance sheet? - Correct Answer ✔✔
Ownership & Debt
Which term is defined as the residual interest in the net assets of a company? - Correct
Answer ✔✔ Owners' equity
A corporation has total liabilities of $300 million, total owners' equity of $100 million, and
current assets of $50 million. What is the value of the firm's long-term assets? - Correct
Answer ✔✔ $350 million
Which situation should result in revenue recognition on the income statement for the
year ending 12/31/14 if the firm is using accrual-basis accounting? - Correct Answer
✔✔ In 2014, a company provides services to a customer for which cash will be
collected the next year (2015).
Which category on the statement of cash flows summarizes cash receipts and
payments to owners and creditors of the company? - Correct Answer ✔✔ Cash flows
from financing activities
Cash flows from financing activities? - Correct Answer ✔✔ In the notes to financial
statements
Which assurance does an external audit report provide for its readers? - Correct Answer
✔✔ The company's financial statements fairly reflect its financial position
Information that can be verified? - Correct Answer ✔✔ Reliable
Information having to do with the matter at hand? - Correct Answer ✔✔ Relevant
Information that is important enough to make a difference? - Correct Answer ✔✔
Material
Information related to recognizing losses as they occur? - Correct Answer ✔✔
Conservatism
