D196 WGU
Vertical analysis is used to compare percentages at the same point in time across companies in the same
industry. It provides information on how a company's financial value or financial gain/loss compares to
another similar company. - answers✔✔What is vertical analysis and what information does it provide?
Common-Size Financial Statements are included in most of the main statements and reduces figures to
be more easily understood(such as reducing numbers to percentages). Horizontal and Vertical analysis is
used to analyze a company's performance over a certain period of time. - answers✔✔· What are
common-size financial statements and how are they used?
Potential investors and creditors use accounting information, but basically everyone uses accounting
information. They use it to make internal and external business decisions. - answers✔✔· Who uses
accounting information and why?
Important influences on accounting is the development of the "generally accepted accounting
principles"(GAAP), international business and ethical consideration. - answers✔✔· What are the
important influences on accounting?
Being an accountant requires honesty and integrity, as well as professional judgement. So having ethics
in accounting is very important. - answers✔✔· What is the role of ethics in accounting?
The 3 main functions of accounting are: Analyzing, Bookkeeping, and Evaluating(ABE). -
answers✔✔What are the three main functions of accounting?
An organization responsible for studying accounting issues and establishing standards
a) Private group
b) Public process
c) Establishes GAAP - answers✔✔The Financial Accounting Standards Board(FASB)
A private, non governmental organization who sets accounting and financial reporting standards for
state and local governments - answers✔✔The Governmental Accounting Standards Board(GASB)
,Regulates stock exchanges
a) Has legal authority to regulate financial markets and accounting
b) Usually defers to the FASB on accounting matters - answers✔✔Securities and Exchange
Commission(SEC)
Oversees all accounting firms. - answers✔✔The Public Company Accounting Oversight Board(PCAOB)
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. - answers✔✔What is the role and purpose of accounting ?
Collects and regulates income taxes - answers✔✔Internal Revenue Service(IRS)
The FASB of the world(except the USA) - answers✔✔International Accounting Standards Board(IASB)
assets are what we OWN.
Common Assets:
-) Cash
-) Accounts receivable
-) Inventory
-) Buildings
-) Prepaid - answers✔✔Assets
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 - answers✔✔Liabilities
The owners share of earnings.
A) Sources of equity:
-) Capital/Common Stock
-) Retained Earnings - answers✔✔Owners Equity
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 transactions
Step 3: Summarize the effects
Step 4: Prepare reports - answers✔✔What is the Accounting Cycle and how does it work?
Assets=Liability+Equity(ALE) - answers✔✔· What is the Accounting Equation?
Assets=Liabilities+(Capital Stock+Cumulative Net Income-Cumulative Dividends) - answers✔✔Can you
explain the 'expanded' accounting equation?
Balance Sheet, Income Statement, Statement of Cash Flows, Statement of Retained Earnings -
answers✔✔What are the four financial statements covered in this module?
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. -
answers✔✔Can you define and explain the purpose of the Balance Sheet and its components?
Vertical analysis is used to compare percentages at the same point in time across companies in the same
industry. It provides information on how a company's financial value or financial gain/loss compares to
another similar company. - answers✔✔What is vertical analysis and what information does it provide?
Common-Size Financial Statements are included in most of the main statements and reduces figures to
be more easily understood(such as reducing numbers to percentages). Horizontal and Vertical analysis is
used to analyze a company's performance over a certain period of time. - answers✔✔· What are
common-size financial statements and how are they used?
Potential investors and creditors use accounting information, but basically everyone uses accounting
information. They use it to make internal and external business decisions. - answers✔✔· Who uses
accounting information and why?
Important influences on accounting is the development of the "generally accepted accounting
principles"(GAAP), international business and ethical consideration. - answers✔✔· What are the
important influences on accounting?
Being an accountant requires honesty and integrity, as well as professional judgement. So having ethics
in accounting is very important. - answers✔✔· What is the role of ethics in accounting?
The 3 main functions of accounting are: Analyzing, Bookkeeping, and Evaluating(ABE). -
answers✔✔What are the three main functions of accounting?
An organization responsible for studying accounting issues and establishing standards
a) Private group
b) Public process
c) Establishes GAAP - answers✔✔The Financial Accounting Standards Board(FASB)
A private, non governmental organization who sets accounting and financial reporting standards for
state and local governments - answers✔✔The Governmental Accounting Standards Board(GASB)
,Regulates stock exchanges
a) Has legal authority to regulate financial markets and accounting
b) Usually defers to the FASB on accounting matters - answers✔✔Securities and Exchange
Commission(SEC)
Oversees all accounting firms. - answers✔✔The Public Company Accounting Oversight Board(PCAOB)
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. - answers✔✔What is the role and purpose of accounting ?
Collects and regulates income taxes - answers✔✔Internal Revenue Service(IRS)
The FASB of the world(except the USA) - answers✔✔International Accounting Standards Board(IASB)
assets are what we OWN.
Common Assets:
-) Cash
-) Accounts receivable
-) Inventory
-) Buildings
-) Prepaid - answers✔✔Assets
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 - answers✔✔Liabilities
The owners share of earnings.
A) Sources of equity:
-) Capital/Common Stock
-) Retained Earnings - answers✔✔Owners Equity
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 transactions
Step 3: Summarize the effects
Step 4: Prepare reports - answers✔✔What is the Accounting Cycle and how does it work?
Assets=Liability+Equity(ALE) - answers✔✔· What is the Accounting Equation?
Assets=Liabilities+(Capital Stock+Cumulative Net Income-Cumulative Dividends) - answers✔✔Can you
explain the 'expanded' accounting equation?
Balance Sheet, Income Statement, Statement of Cash Flows, Statement of Retained Earnings -
answers✔✔What are the four financial statements covered in this module?
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. -
answers✔✔Can you define and explain the purpose of the Balance Sheet and its components?
