WGU C213 STUDY GUIDE QUESTIONS
& UPDATED ANSWERS RATED 100%
COMPLETE
purpose of accounting - Correct Answer ✔✔ Accounting is the recording of the day-to-
day financial activities of a company and the organization of that information into
summary reports used to evaluate the company's financial status.
Bookkeeping is a part of accounting. Bookkeeping refers to the process of recording
transactions into various accounts, which is the first step in accounting. The next step is
to analyze the accounts and organize them into financial statements and other useful
reports. (Reference topic 1.1)
The balance sheet - Correct Answer ✔✔ reports a company's assets, liabilities, and
owners' equity. It reports the financial position of a firm at a point in time.
income statement - Correct Answer ✔✔ reports the amount of net income earned by a
company during a period. Net income is the excess of a company's revenues over its
expenses. It reports the financial performance of a firm over a period of time.
statement of cash flows - Correct Answer ✔✔ reports the amount of cash collected and
paid out by a company in the following three types of activities: operating, investing, and
financing over a period of time. (Reference topic 1.2)
Fin Statement Users: Lenders - Correct Answer ✔✔ Banks use companies' financial
statements in making decisions about commercial loans. The financial statements are
useful because they help the lender predict the future ability of the borrower to repay the
loan.
Fin Statement Users: Investors - Correct Answer ✔✔ Investors want information to help
them estimate how much cash they can expect to directly receive from the business in
the future if they invest in it now.
Fin Statement Users: Company Management - Correct Answer ✔✔ Managers use
financial accounting data to formulate company goals, to compute bonuses for
employees, and to illuminate company weaknesses.
Fin Statement Users: Suppliers and Customers - Correct Answer ✔✔ Suppliers,
customers, and employees use financial statements to tell them about the long-run
prospects of a company.
Fin Statement Users: Employees - Correct Answer ✔✔ Financial statement data, as
mentioned earlier, are used in determining employee bonuses. In addition, financial
,accounting information can help an employee evaluate the employer's ability to fulfill its
long-run promises, such as for pensions and retiree health care benefits. Financial
statements are also important in contract negotiations between labor and management.
Fin Statement Users: Competitors - Correct Answer ✔✔ Competitors use financial
accounting information to reveal strategic opportunities within their industry.
Government Agencies - Correct Answer ✔✔ Government agencies use financial
statement data to bolster political and regulatory positions for and against companies.
Fin Statement Users: The Press - Correct Answer ✔✔ Reporters use financial
accounting data as background information and to indicate which companies are
undergoing significant changes in financial status. (Reference Topic 1.3)
Fin Statement Users: Politicians - Correct Answer ✔✔ Politicians use financial
statement data to bolster political and regulatory positions for and against companies.
Acct Rules: Financial Accountings Standards Board (FASB) - Correct Answer ✔✔ sets
accounting rules for the private section in the U.S.. It is a private, non-profit body
established and supported by the joint efforts of the U.S. business community, financial
analysts, and practicing accountants.
The FASB has no legal power to enforce the accounting standards it sets but maintains
its influence by carefully protecting its prestige and reputation. The standards it sets are
called Generally Accepted Accounting Standards (GAAP). These are a common set of
accounting principles, standards, and procedures that companies must follow when they
compile their financial statements. (Reference Topic 1.4)
Acct Rules: Securities and Exchange Commission (SEC) - Correct Answer ✔✔ has the
legal authority to set accounting rules, but has deferred that responsibility to the FASB
in most cases. The SEC regulates U.S. stock exchanges and seeks to create a fair
information environment in which investors can buy and sell stocks without fear that
companies who sell stocks to the general public are hiding or manipulating financial
data. (Reference topic 1.5)
Acct Org: CPA Accreditation - Correct Answer ✔✔ The American Institute of Certified
Public Accountants (AICPA) is the professional organization of certified public
accountants (CPAs) in the United States. A CPA is someone who has taken a minimum
number of college-level accounting classes, has passed the CPA exam, and has met
other requirements set by his or her state. A CPA firm is a company that provides
freelance business advice, particularly in connection with accounting issues and
executes the vast majority of external audits in the US.
The AICPA sets ethical standards for CPAs, provides continuing education for them,
writes and grades the CPA exam, lobbies for legislation favored by CPAs, and provides
other support to CPAs. Its oversight of the CPA exam is its main role in accreditation.
However, to be accredited as a CPA you must meet the requirements of the state in
which you plan to practice. The requirements for each state are set by that state's
, legislature and overseen by that state's Board of Accountancy, which is a state agency.
(Reference Topic 1.5)
Acct Org: Public Company Accounting Oversight Board (PCAOB) - Correct Answer ✔✔
determines who can audit public companies regardless of whether the audit firm is
accredited by a state Board of Accountancy. Thus, they accredit firms that can audit
public companies.
Current Trends changing Accounting: Globalization - Correct Answer ✔✔ As more and
more business do business globally, capital flows more freely across national
boundaries. This means investors can choose to invest in firms all over the planet. To
help them make investment decisions, the global accounting and regulatory
communities are working to bring accounting standards around the world into
agreement the IASB was one step in that direction, but nations still control the
accounting standards used within their borders and so much of the standardization is
being done through voluntary cooperation
Current Trends changing Accounting: Technology - Correct Answer ✔✔ Information
technology has speeded up the pace with which accounting data and reports are
produced and dramatically increased the volume of accounting information that firms
can provide to investors. (Reference Topic 1.6)
components of a balance sheet - Correct Answer ✔✔ Balance Sheet are Assets,
Liabilities, and Equity. Both assets and liabilities are further separated into current and
long term based on whether the asset is expected to be consumed or the liability paid
within a year. Assets expected to be consumed and liabilities expected to be paid within
a year are current and those that will be consumed or paid after a year are long-term.
Equity is separated into paid in capital (also referred to as capital stock) and retained
earnings. Paid in capital is created when an owner buys stock from the firm. Retained
earnings are the accumulated earnings of the firm (i.e., net income over time) that have
not been paid back in dividends. Paid in capital also is referred to as contributed capital
while retained earnings is earned capital.
components of the income statement - Correct Answer ✔✔ Income Statement
describes a company's financial performance for a period of time. A company's
expenses are subtracted from its revenues and gains and losses are also factored in
computing net income. Net income helps explain the change in retained earnings
between two Balance Sheet dates, along with dividends and unrealized gains and
losses.
A single step income statement lumps all revenues together and subtracts all expenses
to calculate net income. A multiple-step presents subtotals that highlight key
performance measures. Its categories include:
Sales or revenues
- Cost of goods sold (COGS) (Product costs of items sold)
= Gross profit
- Selling and Administrative expenses (also called operating expenses)
& UPDATED ANSWERS RATED 100%
COMPLETE
purpose of accounting - Correct Answer ✔✔ Accounting is the recording of the day-to-
day financial activities of a company and the organization of that information into
summary reports used to evaluate the company's financial status.
Bookkeeping is a part of accounting. Bookkeeping refers to the process of recording
transactions into various accounts, which is the first step in accounting. The next step is
to analyze the accounts and organize them into financial statements and other useful
reports. (Reference topic 1.1)
The balance sheet - Correct Answer ✔✔ reports a company's assets, liabilities, and
owners' equity. It reports the financial position of a firm at a point in time.
income statement - Correct Answer ✔✔ reports the amount of net income earned by a
company during a period. Net income is the excess of a company's revenues over its
expenses. It reports the financial performance of a firm over a period of time.
statement of cash flows - Correct Answer ✔✔ reports the amount of cash collected and
paid out by a company in the following three types of activities: operating, investing, and
financing over a period of time. (Reference topic 1.2)
Fin Statement Users: Lenders - Correct Answer ✔✔ Banks use companies' financial
statements in making decisions about commercial loans. The financial statements are
useful because they help the lender predict the future ability of the borrower to repay the
loan.
Fin Statement Users: Investors - Correct Answer ✔✔ Investors want information to help
them estimate how much cash they can expect to directly receive from the business in
the future if they invest in it now.
Fin Statement Users: Company Management - Correct Answer ✔✔ Managers use
financial accounting data to formulate company goals, to compute bonuses for
employees, and to illuminate company weaknesses.
Fin Statement Users: Suppliers and Customers - Correct Answer ✔✔ Suppliers,
customers, and employees use financial statements to tell them about the long-run
prospects of a company.
Fin Statement Users: Employees - Correct Answer ✔✔ Financial statement data, as
mentioned earlier, are used in determining employee bonuses. In addition, financial
,accounting information can help an employee evaluate the employer's ability to fulfill its
long-run promises, such as for pensions and retiree health care benefits. Financial
statements are also important in contract negotiations between labor and management.
Fin Statement Users: Competitors - Correct Answer ✔✔ Competitors use financial
accounting information to reveal strategic opportunities within their industry.
Government Agencies - Correct Answer ✔✔ Government agencies use financial
statement data to bolster political and regulatory positions for and against companies.
Fin Statement Users: The Press - Correct Answer ✔✔ Reporters use financial
accounting data as background information and to indicate which companies are
undergoing significant changes in financial status. (Reference Topic 1.3)
Fin Statement Users: Politicians - Correct Answer ✔✔ Politicians use financial
statement data to bolster political and regulatory positions for and against companies.
Acct Rules: Financial Accountings Standards Board (FASB) - Correct Answer ✔✔ sets
accounting rules for the private section in the U.S.. It is a private, non-profit body
established and supported by the joint efforts of the U.S. business community, financial
analysts, and practicing accountants.
The FASB has no legal power to enforce the accounting standards it sets but maintains
its influence by carefully protecting its prestige and reputation. The standards it sets are
called Generally Accepted Accounting Standards (GAAP). These are a common set of
accounting principles, standards, and procedures that companies must follow when they
compile their financial statements. (Reference Topic 1.4)
Acct Rules: Securities and Exchange Commission (SEC) - Correct Answer ✔✔ has the
legal authority to set accounting rules, but has deferred that responsibility to the FASB
in most cases. The SEC regulates U.S. stock exchanges and seeks to create a fair
information environment in which investors can buy and sell stocks without fear that
companies who sell stocks to the general public are hiding or manipulating financial
data. (Reference topic 1.5)
Acct Org: CPA Accreditation - Correct Answer ✔✔ The American Institute of Certified
Public Accountants (AICPA) is the professional organization of certified public
accountants (CPAs) in the United States. A CPA is someone who has taken a minimum
number of college-level accounting classes, has passed the CPA exam, and has met
other requirements set by his or her state. A CPA firm is a company that provides
freelance business advice, particularly in connection with accounting issues and
executes the vast majority of external audits in the US.
The AICPA sets ethical standards for CPAs, provides continuing education for them,
writes and grades the CPA exam, lobbies for legislation favored by CPAs, and provides
other support to CPAs. Its oversight of the CPA exam is its main role in accreditation.
However, to be accredited as a CPA you must meet the requirements of the state in
which you plan to practice. The requirements for each state are set by that state's
, legislature and overseen by that state's Board of Accountancy, which is a state agency.
(Reference Topic 1.5)
Acct Org: Public Company Accounting Oversight Board (PCAOB) - Correct Answer ✔✔
determines who can audit public companies regardless of whether the audit firm is
accredited by a state Board of Accountancy. Thus, they accredit firms that can audit
public companies.
Current Trends changing Accounting: Globalization - Correct Answer ✔✔ As more and
more business do business globally, capital flows more freely across national
boundaries. This means investors can choose to invest in firms all over the planet. To
help them make investment decisions, the global accounting and regulatory
communities are working to bring accounting standards around the world into
agreement the IASB was one step in that direction, but nations still control the
accounting standards used within their borders and so much of the standardization is
being done through voluntary cooperation
Current Trends changing Accounting: Technology - Correct Answer ✔✔ Information
technology has speeded up the pace with which accounting data and reports are
produced and dramatically increased the volume of accounting information that firms
can provide to investors. (Reference Topic 1.6)
components of a balance sheet - Correct Answer ✔✔ Balance Sheet are Assets,
Liabilities, and Equity. Both assets and liabilities are further separated into current and
long term based on whether the asset is expected to be consumed or the liability paid
within a year. Assets expected to be consumed and liabilities expected to be paid within
a year are current and those that will be consumed or paid after a year are long-term.
Equity is separated into paid in capital (also referred to as capital stock) and retained
earnings. Paid in capital is created when an owner buys stock from the firm. Retained
earnings are the accumulated earnings of the firm (i.e., net income over time) that have
not been paid back in dividends. Paid in capital also is referred to as contributed capital
while retained earnings is earned capital.
components of the income statement - Correct Answer ✔✔ Income Statement
describes a company's financial performance for a period of time. A company's
expenses are subtracted from its revenues and gains and losses are also factored in
computing net income. Net income helps explain the change in retained earnings
between two Balance Sheet dates, along with dividends and unrealized gains and
losses.
A single step income statement lumps all revenues together and subtracts all expenses
to calculate net income. A multiple-step presents subtotals that highlight key
performance measures. Its categories include:
Sales or revenues
- Cost of goods sold (COGS) (Product costs of items sold)
= Gross profit
- Selling and Administrative expenses (also called operating expenses)
