C928 WGU IT FINANCE (GLOSSARY TERMS) QUESTIONS
AND ANSWERS
account payable - CORRECT ANSWER✅✅The liability created by a purchase on account.
account receivable - CORRECT ANSWER✅✅A claim against the customer created by selling
merchandise or services on credit. This item is shown on the Balance Sheet.
accounting - CORRECT ANSWER✅✅An information system that provides reports to users about the
economic activities and condition of a business.
accounting assumptions - CORRECT ANSWER✅✅Assumptions that provide the framework upon which
accounting standards are constructed.
accounting equation - CORRECT ANSWER✅✅Assets = Liabilities + Stockholder's Equity.
accounting principles - CORRECT ANSWER✅✅Principles that provide the framework upon which
accounting standards are constructed.
accounting standards - CORRECT ANSWER✅✅The rules that determine the accounting for individual
business transactions.
arm's-length transactions - CORRECT ANSWER✅✅Transactions between two independent parties.
assets - CORRECT ANSWER✅✅The resources owned by a business.
balance sheet - CORRECT ANSWER✅✅A list of the assets, liabilities, and stockholders' equity as of a
specific date, usually at the close of the last day of a month or a year.
business - CORRECT ANSWER✅✅An organization in which basic resources (inputs), such as materials
and labor, are assembled and processed to provide goods or services (outputs) to customers.
,business entity assumption - CORRECT ANSWER✅✅A concept of accounting that limits the economic
data in the accounting system to data related directly to the activities of the business.
business transaction - CORRECT ANSWER✅✅An economic event or condition that directly changes an
entity's financial condition or directly affects its results of operations.
Certified Public Accountant (CPA) - CORRECT ANSWER✅✅Public accountants who have met a state's
education, experience, and examination requirements.
common stock - CORRECT ANSWER✅✅The stock outstanding when a corporation has issued only one
class of stock.
corporation - CORRECT ANSWER✅✅A business organized under state or federal statutes as a separate
legal entity.
cost principle - CORRECT ANSWER✅✅Recording an item at its initial transaction price, also called the
historical cost principle.
dividends - CORRECT ANSWER✅✅Distribution of a corporation's earnings to stockholders.
earnings - CORRECT ANSWER✅✅The amount by which revenues exceed expenses.
equity - CORRECT ANSWER✅✅The rights of owners.
ethics - CORRECT ANSWER✅✅Moral principles that guide the conduct of individuals.
expense recognition principle - CORRECT ANSWER✅✅A principle, sometimes called the matching
principle, that requires expenses to be recorded in the same period as the related revenue.
, expenses - CORRECT ANSWER✅✅Assets used up or services consumed in the process of generating
revenues.
faithful representation - CORRECT ANSWER✅✅A characteristic of financial reports that pertains to
information accurately reflecting an entity's economic activity or condition.
fees earned - CORRECT ANSWER✅✅Revenue from providing services.
financial accounting - CORRECT ANSWER✅✅The branch of accounting that is concerned with recording
transactions using generally accepted accounting principles (GAAP) for a business or other economic
unit and with a periodic preparation of various statements from such records.
Financial Accounting Standards Board (FASB) - CORRECT ANSWER✅✅The authoritative body that has
the primary responsibility for developing accounting principles.
financial statements - CORRECT ANSWER✅✅Financial reports that summarize the effects of events on a
business.
generally accepted accounting principles (GAAP) - CORRECT ANSWER✅✅Generally accepted guidelines
for the preparation of financial statements.
general-purpose financial statements - CORRECT ANSWER✅✅A type of financial accounting report that
is distributed to external users. The term "general purpose" refers to the wide range of decision making
needs that the reports are designed to serve.
going concern assumption - CORRECT ANSWER✅✅An assumption that requires that financial reports
be prepared assuming that the entity will continue operating into the future.
historical cost principle - CORRECT ANSWER✅✅Recording an item at its initial transaction price.
income statement - CORRECT ANSWER✅✅A summary of the revenue and expenses for a specific
period of time, such as a month or a year.
AND ANSWERS
account payable - CORRECT ANSWER✅✅The liability created by a purchase on account.
account receivable - CORRECT ANSWER✅✅A claim against the customer created by selling
merchandise or services on credit. This item is shown on the Balance Sheet.
accounting - CORRECT ANSWER✅✅An information system that provides reports to users about the
economic activities and condition of a business.
accounting assumptions - CORRECT ANSWER✅✅Assumptions that provide the framework upon which
accounting standards are constructed.
accounting equation - CORRECT ANSWER✅✅Assets = Liabilities + Stockholder's Equity.
accounting principles - CORRECT ANSWER✅✅Principles that provide the framework upon which
accounting standards are constructed.
accounting standards - CORRECT ANSWER✅✅The rules that determine the accounting for individual
business transactions.
arm's-length transactions - CORRECT ANSWER✅✅Transactions between two independent parties.
assets - CORRECT ANSWER✅✅The resources owned by a business.
balance sheet - CORRECT ANSWER✅✅A list of the assets, liabilities, and stockholders' equity as of a
specific date, usually at the close of the last day of a month or a year.
business - CORRECT ANSWER✅✅An organization in which basic resources (inputs), such as materials
and labor, are assembled and processed to provide goods or services (outputs) to customers.
,business entity assumption - CORRECT ANSWER✅✅A concept of accounting that limits the economic
data in the accounting system to data related directly to the activities of the business.
business transaction - CORRECT ANSWER✅✅An economic event or condition that directly changes an
entity's financial condition or directly affects its results of operations.
Certified Public Accountant (CPA) - CORRECT ANSWER✅✅Public accountants who have met a state's
education, experience, and examination requirements.
common stock - CORRECT ANSWER✅✅The stock outstanding when a corporation has issued only one
class of stock.
corporation - CORRECT ANSWER✅✅A business organized under state or federal statutes as a separate
legal entity.
cost principle - CORRECT ANSWER✅✅Recording an item at its initial transaction price, also called the
historical cost principle.
dividends - CORRECT ANSWER✅✅Distribution of a corporation's earnings to stockholders.
earnings - CORRECT ANSWER✅✅The amount by which revenues exceed expenses.
equity - CORRECT ANSWER✅✅The rights of owners.
ethics - CORRECT ANSWER✅✅Moral principles that guide the conduct of individuals.
expense recognition principle - CORRECT ANSWER✅✅A principle, sometimes called the matching
principle, that requires expenses to be recorded in the same period as the related revenue.
, expenses - CORRECT ANSWER✅✅Assets used up or services consumed in the process of generating
revenues.
faithful representation - CORRECT ANSWER✅✅A characteristic of financial reports that pertains to
information accurately reflecting an entity's economic activity or condition.
fees earned - CORRECT ANSWER✅✅Revenue from providing services.
financial accounting - CORRECT ANSWER✅✅The branch of accounting that is concerned with recording
transactions using generally accepted accounting principles (GAAP) for a business or other economic
unit and with a periodic preparation of various statements from such records.
Financial Accounting Standards Board (FASB) - CORRECT ANSWER✅✅The authoritative body that has
the primary responsibility for developing accounting principles.
financial statements - CORRECT ANSWER✅✅Financial reports that summarize the effects of events on a
business.
generally accepted accounting principles (GAAP) - CORRECT ANSWER✅✅Generally accepted guidelines
for the preparation of financial statements.
general-purpose financial statements - CORRECT ANSWER✅✅A type of financial accounting report that
is distributed to external users. The term "general purpose" refers to the wide range of decision making
needs that the reports are designed to serve.
going concern assumption - CORRECT ANSWER✅✅An assumption that requires that financial reports
be prepared assuming that the entity will continue operating into the future.
historical cost principle - CORRECT ANSWER✅✅Recording an item at its initial transaction price.
income statement - CORRECT ANSWER✅✅A summary of the revenue and expenses for a specific
period of time, such as a month or a year.
