D196 WGU exam (Questions + Answers) Solved

What is the role and purpose of accounting ? - Answer-Role: To help track income and expenditures, and to provide investors, management, and government with financial information. Purpose: To accumulate, measure, and communicate financial information about businesses and other organizations. · Who uses accounting information and why? - Answer-Potential investors and creditors use accounting information, but basically everyone uses accounting information. They use it to make internal and external business decisions. · What are the important influences on accounting? - Answer-Important influences on accounting is the development of the "generally accepted accounting principles"(GAAP), international business and ethical consideration. · What is the role of ethics in accounting? - Answer-Being an accountant requires honesty and integrity, as well as professional judgement. So having ethics in accounting is very important. What are the three main functions of accounting? - Answer-The 3 main functions of accounting are: Analyzing, Bookkeeping, and Evaluating(ABE). The Financial Accounting Standards Board(FASB) - Answer-An organization responsible for studying accounting issues and establishing standards a) Private group b) Public process c) Establishes GAAP The Governmental Accounting Standards Board(GASB) - Answer-A private, non governmental organization who sets accounting and financial reporting standards for state and local governments Securities and Exchange Commission(SEC) - Answer-Regulates stock exchanges a) Has legal authority to regulate financial markets and accounting b) Usually defers to the FASB on accounting mattersThe Public Company Accounting Oversight Board(PCAOB) - Answer-Oversees all accounting firms. Internal Revenue Service(IRS) - Answer-Collects and regulates income taxes International Accounting Standards Board(IASB) - Answer-The FASB of the world(except the USA) Assets - Answer-assets are what we OWN. Common Assets: -) Cash -) Accounts receivable -) Inventory -) Buildings -) Prepaid Liabilities - Answer-An obligation to pay cash, transfer other assets, or provide services to someone. A) Liabilities are what we OWE. B) Common Liabilities: -) Accounts Payable -) Taxes Payable -) Mortgage Payable -) Unearned Revenue Owners Equity - Answer-The owners share of earnings. A) Sources of equity: -) Capital/Common Stock -) Retained Earnings What is the Accounting Cycle and how does it work? - Answer-The accounting cycle is the procedure for analyzing, recording, summarizing, and preparing the transactions of a business. The accounting cycle works by turning transactions into financial statements through these steps: Step 1: Analyze Transactions Step 2: Record the effects of transactionsStep 3: Summarize the effects Step 4: Prepare reports · What is the Accounting Equation? - Answer-Assets=Liability+Equity(ALE) Can you explain the 'expanded' accounting equation? - Answer-Assets=Liabilities+(Capital Stock+Cumulative Net Income-Cumulative Dividends) What are the four financial statements covered in this module? - Answer-Balance Sheet, Income Statement, Statement of Cash Flows, Statement of Retained Earnings Can you define and explain the purpose of the Balance Sheet and its components? - Answer-A balance sheet is the statement of the company's financial position at a certain period, and records the company's assets, liabilities, and owners' equity. The purpose of a balance sheet is to report the resources of a company, the company's obligations, and the owners' equity. The components of a balance sheet are: Assets, Liabilities, and Owner's equity. -) The balance sheet equation: Assets=Liabilities+Equity(ALE). -) Classified Balance Sheet: A balance sheet that distinguishes between current and long-term assets. Can you define and explain the purpose of the Income Statement and the components that it contains? - Answer-An income statement is the statement of earnings, and records the amount of revenue(profits) generated, and costs incurred(expenses) by a company during a period of time(a month, a quarter, a year). The purpose of an income statement is to assess a company's profitability by looking at the company's profits, and expenses. The income statement also summarizes the company's operations at a certain period. The components of an income statement are: revenues, expenses, and net income. Can you define and explain the purpose of the Statement of Retained Earnings and the components that it contains? - Answer-A statement of retained earnings identifies the changes in accumulated investments made by owners, and the losses/profits of a business since day one. The purpose of a statement of retained earnings is to identify changes in investments made by owners from the beginning of the statement to the end. The components of a statement of retained earnings are: Retained Earnings from the previous period, Net Income, and Dividends.Can you define and explain the purpose of the Statement of Cash Flows and the components that it contains? - Answer-A statement of cash flows reports the amount of cash collected and cash paid out by a company in operating, investing, and financing operations during a period of time. The purpose of a statement of cash flows is to provide information of cash inflows(receipts) and cash outflows(payments).The components of a statement of cash flows are: -) Operating activities: Which are normal business activities a) Examples of operating activities: Paying employees, paying rent, and collecting cash from customers. -) Investing activities: Associated with buying and selling long-term assets a) Examples of investing activities: Buying/selling land, Buying/selling equipment, etc. -) Financing activities: The activities in which cash is collected from or repaid to investors and creditors. a) Examples of financing activities: Borrowing money, repaying loans, and paying dividends