WGU C213 Accounting for Decision Makers Final Exam Questions and Verified Answers

Accounting A system of providing "quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions." Accounting Equation Assets = Liabilities + Owners' Equity Accounts Payable The flip side of accounts receivable—when one company sells on credit, creating for itself an account receivable, the company on the other side of the transaction is buying on credit, creating an account payable. Accounts Receivable Amounts owed to a business by its credit customers and are usually collected in cash within 10 to 60 days. Accrual Accounting The process that accountants use in adjusting raw transaction data into refined measures of a firm's economic performance. Accumulated Depreciation Reflects the wear and tear, or depreciation, of these items since they were originally purchased. Accumulated Other Comprehensive Income The grouped together and reported changes which companies experience increases and decreases in equity each year because of the movement of market prices or exchange rates Activity-based Costing (ABC) A method of attributing overhead costs to products based on measurable factors that relate to activities that create overhead costs. Additional Paid-in Capital Invested by stockholders that exceeds the par value of the issued shares. 10/16/25, 10:22 PM WGU C213 Accounting for Decision Makers American Institute of Certified Public Accountants (AICPA) The professional organization of certified public accountants in the United States. Asset Probable future economic benefit obtained or controlled by a particular entity as a result of past transactions or events. Asset Mix The proportion of total assets in each asset category, is determined to a large degree by the industry in which the company operates. Asset Turnover Assets Assets-to-equity Ratio Audit Committee Sales divided by assets and is interpreted as the number of dollars in sales generated by each dollar of assets. Assets are the firm's economic resources, formally defined as "probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events Assets divided by equity and is interpreted as the number of dollars of assets acquired for each dollar invested by stockholders. Members of a company's board of directors who are responsible for dealing with the external and internal auditors. 2/86 10/16/25, 10:22 PM WGU C213 Accounting for Decision Makers Average Collection Period Shows the average number of days that elapse between sale and cash collection. Balance Sheet A listing of an organization's assets and of its liabilities at a certain time. Activities that take place in order to support a batch or Batch-level Activities cost even if the total amount produced stays the same) production run, regardless of the size of the batch. (starting & stopping, small productions runs = higher Book Value Bookkeeping Break-even Point The book value of an asset is the asset's cost minus the asset's accumulated depreciation. The preservation of a systematic, quantitative record of an activity. 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. Capital Budgeting Systematic planning for long-term investments in operating assets. Capital Lease Obligations Cash A long-term liability in the balance sheet. Coins and currency as well as the balances in company checking and savings accounts. Cash Budget Cash Equivalents An important tool in helping management plan its cash needs. Short-term, highly liquid investments such as Treasury bills, commercial paper, and money market funds. Cash Flow Adequacy Ratio Cash from operations divided by expenditures for fixed asset additions and acquisitions of new businesses Cash Times Interest Earned Ratio A financial analysis tool that indicates the interest payment ability of an entity A person who has taken a minimum number of college Certified Public Accountant Common Stock level accounting classes, has passed the dreaded CPA exam, and has met other requirements set by his or her state. Common-size Financial Statements Stockholders' equity investment All amounts for a given year being shown as a percentage of that denominator for the year. Comparability Tnformation that becomes much more useful when it can be related to a benchmark or standard 3/86 10/16/25, 10:22 PM WGU C213 Accounting for Decision Makers Comprehensive Income Conservatism The number used to reflect an overall measure of the change in a company's wealth during the period a pervasive factor in accounting, can be summarized as follows: When in doubt, recognize all losses but don't recognize any gains. Consistency The consistency principle states that, once you adopt an accounting principle or method, continue to follow it consistently in future accounting periods. Contribution Margin The difference between total sales and variable costs; the portion of sales revenue available to cover fixed costs and provide a profit. 4/86 10/16/25, 10:22 PM WGU C213 Accounting for Decision Makers 5/86 Contribution Margin Ratio The percentage of net sales revenue left after variable costs are deducted; the contribution margin divided by net sales revenue. Control Activities Policies and procedures used by management to meet their objectives. Control Environment The actions, policies, and procedures that reflect the overall attitudes of top management about control and its importance to the entity. Control Procedures Policies and procedures used by management to meet their objectives. Controlling Implementing management plans and identifying how plans compare with actual performance. Cost Behavior The way a cost is affected by changes in activity levels. Cost Drivers Numerical measure used to reflect the amount of a specific cost that is associated with a particular activity. Cost Pool Total cost being generated by a specific overhead cost activity. Cost of Goods Sold When a business sells goods to customers, the cost of the goods sold is recorded as an expense Cost-volume-profit (C-V-P) Analysis Techniques for determining how changes in revenues, costs, and level of activity affect the profitability of an organization. Current Assets Cash, accounts receivable, and inventory. Current Liabilities Those obligations expected to be paid within one year, the most common being accounts payable. Current Portion of Long-term Debt Some liabilities, such as mortgages, are payable in equal monthly installments over a specified number of years. The portion of these liabilities that is payable within 12 months from the balance sheet date. Current Ratio A comparison of current assets (cash, receivables, and inventory) with current liabilities. It is computed by dividing total current assets by total current liabilities. Debt Ratio A frequently used measure of leverage, computed as total liabilities divided by total assets. Debt-to-equity Ratio Total liabilities divided by total equity and is interpreted as the number of dollars of borrowing for each dollar 10/16/25, 10:22 PM WGU C213 Accounting for Decision Makers of equity investment Deferred Income Tax Liability The income tax expected to be paid in future years on income that has already been reported in the income statement but which, because of the tax law, has not yet been taxed. Derivative A financial instrument, such as an option or a future, that derives its value from the movement of a price, an exchange rate, or an interest rate associated with some other item. Detective Controls Internal control activities that are designed to detect the occurrence of errors and fraud. Differential Costs Future costs that change as a result of a decision; also called incremental or relevant costs. Direct Costs Costs that are specifically traceable to a unit of business or segment being analyzed. Wages paid to those who physically work on direct Direct Labor materials to transform them into a finished product and are traceable to specific products.