WGU D196 PRINCIPLES OF FINANCIAL AND MANAGERIAL
ACCOUNTING ~ WESTERN GOVERNORS UNIVERSITY | 2026
STUDY GUIDE COMPREHENSIVE NOTES WITH COMPLETE
SOLUTIONS
Study Guide: Principles of Financial and Managerial
Accounting - D196
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
ACCOUNTING ~ WESTERN GOVERNORS UNIVERSITY | 2026
STUDY GUIDE COMPREHENSIVE NOTES WITH COMPLETE
SOLUTIONS
Study Guide: Principles of Financial and Managerial
Accounting - D196
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
