Study Guide: Principles of Financial and
Managerial Accounting - D196 WGU.
Accounting
A system for providing quantitative, financial information about economic
entities that is useful for making sound economic decisions. Accounting
provides the means of recording and communicating business activities
and the results of those activities.
Accounting Cycle
The procedure for analyzing, recording, summarizing, and reporting the
transactions of a business.
Accounting Equation
An algebraic equation that expresses the relationship between assets
(resources), liabilities (obligations), and owner’s equity (net assets, or the
residual interest in a business after all liabilities have been met): Assets =
Liabilities + Owners’ Equity.
Accounting System
The procedures and processes used by a business to analyze
transactions, handle routine bookkeeping tasks, and structure
information so it can be used to evaluate the performance and health of
the business.
Management Accounting:
, • Unique competitive tool
• Both financial and nonfinancial data
• Usually kept secret from competitors
• Used for internal planning, control, and evaluation
Financial Accounting:
• Uniform across companies (generally accepted accounting principles)
• Restricted to financial data
• Data often made public
• Used primarily by investors and creditors in deciding whether to
provide capital to the company
*Managerial accounting information is generally prepared by the cost
accountant or the cost accounting manager. A cost accountant is specially
trained to prepare and analyze accounting information for internal
decision-making.
*Financial accounting information is generally prepared by the financial
accounting department, which generally includes a controller, a financial
statement accountant, and a bookkeeper, to name just a few. The financial
accounting department prepares the three basic financial statements (the
balance sheet, income statement, and statement of cash flows).
Three Types of Businesses
A manufacturer constructs physical products.
A service organization provides customers with a nonphysical product.
A merchandiser buys inventory from its suppliers and sells that inventory
to its customers.
Account
An accounting record in which the results of transactions are
accumulated; shows increases, decreases, and a balance.
Decision Making Process
Identify the issue, gather information, identify alternatives, and select best
the option.
Activity-based Costing (ABC)
A method of attributing overhead costs to products based on measurable
factors that relate to activities that create overhead costs.
Actual Manufacturing Overhead
, Manufacturing costs other than direct materials and direct labor.
American Institute of Certified Public Accountants (AICPA)
A professional organization for CPAs in which membership is voluntary.
Annual Report
A document that summarizes the results of operations and financial status
of a company for the past year and outlines future plans.
Applied Manufacturing Overhead
The amount of the manufacturing overhead that is assigned to the goods
produced. This is usually done by using a predetermined annual overhead
rate.
Arm’s-length Transaction
A transaction in which a buyer and seller act independently to get the best
possible deal.
Articulation
The interrelationships among the financial statements.
Assets
Economic resources that are owned or controlled by a company.
Balance Sheet
A summary of the financial position of a company at a particular date.
Batch-level Activities
Activities that take place in order to support a batch or production run,
regardless of the size of the batch.
Book Value
The value of a company measured by the amount of owner’s equity in the
company.
Break Even
To make just enough income to cover costs without any profit or loss.
Break-even Point
The amount of sales at which total costs of the number of units sold equal
total revenues; the point at which there is no profit or loss.
Budget
A quantitative expression of a plan that shows how a firm or organization
will acquire and use resources over some specified period of time.
Business
Managerial Accounting - D196 WGU.
Accounting
A system for providing quantitative, financial information about economic
entities that is useful for making sound economic decisions. Accounting
provides the means of recording and communicating business activities
and the results of those activities.
Accounting Cycle
The procedure for analyzing, recording, summarizing, and reporting the
transactions of a business.
Accounting Equation
An algebraic equation that expresses the relationship between assets
(resources), liabilities (obligations), and owner’s equity (net assets, or the
residual interest in a business after all liabilities have been met): Assets =
Liabilities + Owners’ Equity.
Accounting System
The procedures and processes used by a business to analyze
transactions, handle routine bookkeeping tasks, and structure
information so it can be used to evaluate the performance and health of
the business.
Management Accounting:
, • Unique competitive tool
• Both financial and nonfinancial data
• Usually kept secret from competitors
• Used for internal planning, control, and evaluation
Financial Accounting:
• Uniform across companies (generally accepted accounting principles)
• Restricted to financial data
• Data often made public
• Used primarily by investors and creditors in deciding whether to
provide capital to the company
*Managerial accounting information is generally prepared by the cost
accountant or the cost accounting manager. A cost accountant is specially
trained to prepare and analyze accounting information for internal
decision-making.
*Financial accounting information is generally prepared by the financial
accounting department, which generally includes a controller, a financial
statement accountant, and a bookkeeper, to name just a few. The financial
accounting department prepares the three basic financial statements (the
balance sheet, income statement, and statement of cash flows).
Three Types of Businesses
A manufacturer constructs physical products.
A service organization provides customers with a nonphysical product.
A merchandiser buys inventory from its suppliers and sells that inventory
to its customers.
Account
An accounting record in which the results of transactions are
accumulated; shows increases, decreases, and a balance.
Decision Making Process
Identify the issue, gather information, identify alternatives, and select best
the option.
Activity-based Costing (ABC)
A method of attributing overhead costs to products based on measurable
factors that relate to activities that create overhead costs.
Actual Manufacturing Overhead
, Manufacturing costs other than direct materials and direct labor.
American Institute of Certified Public Accountants (AICPA)
A professional organization for CPAs in which membership is voluntary.
Annual Report
A document that summarizes the results of operations and financial status
of a company for the past year and outlines future plans.
Applied Manufacturing Overhead
The amount of the manufacturing overhead that is assigned to the goods
produced. This is usually done by using a predetermined annual overhead
rate.
Arm’s-length Transaction
A transaction in which a buyer and seller act independently to get the best
possible deal.
Articulation
The interrelationships among the financial statements.
Assets
Economic resources that are owned or controlled by a company.
Balance Sheet
A summary of the financial position of a company at a particular date.
Batch-level Activities
Activities that take place in order to support a batch or production run,
regardless of the size of the batch.
Book Value
The value of a company measured by the amount of owner’s equity in the
company.
Break Even
To make just enough income to cover costs without any profit or loss.
Break-even Point
The amount of sales at which total costs of the number of units sold equal
total revenues; the point at which there is no profit or loss.
Budget
A quantitative expression of a plan that shows how a firm or organization
will acquire and use resources over some specified period of time.
Business
