WGU C708 Principles of Finance Latest
2022 with Verified Solutions
Matching Principle ✔✔The revenues and the expected incurred to generate those revenues must
be reported together; a fundamental component of accrual-based accounting.
Historical Cost Principle ✔✔Items that appear on the financial statement are listed at the cost when
purchased.
Current Assets ✔✔Cash or assets that will be converted into cash within the next year.
Gross Fixed Assets ✔✔Property, Plant, and Equipment (PP&E). These are on the books at their
historical cost. This does not include accumulated depreciation (do not consider accumulated
depreciation when calculating cash flows).
Liquidity ✔✔The more liquid the asset, the more quickly it can be turned into cash; measures how
quickly an asset can be turned into cash without taking a large discount in value.
Marketable Securities ✔✔Short-term, high-quality securities such as Treasury Bills and
certificates of deposit (CDs).
Contra-Asset Account ✔✔A balance/reserve account that decreases the balance of an Accounts
Receivable (AR) account if there is doubt that all payments will be made to the firm to an amount
that they expect to collect.
Inventories ✔✔Includes raw material, work-in-progress, and finished goods. They are the least
liquid.
, Last In, First Out (LIFO) ✔✔Assumes that the last inventory items purchased by the company are
the first ones sold to customers.
First In, First Out (FIFO) ✔✔Assumes that the first units purchased are the first sold.
Historical Cost ✔✔The original purchase price.
Book Value ✔✔Historical Cost - Accumulated Depreciation
Fixed Liabilities ✔✔Obligations that require cash in the next year to pay.
Notes Payable (NP) ✔✔The borrowing of interest-bearing money from a financial institution that
the firm will owe back.
Accruals ✔✔Obligations that have been uncured but not paid, such as employee wages or utilities.
Long-Term Debt ✔✔A debt obligation with a maturity longer than one year, such as rent, office
staff, and administration costs.
Common Stock and Additional Paid-In Capital ✔✔Accounts that are generated when the firm
issues stock.
Retained Earnings (RE) ✔✔Net Income - Dividends. Money generated from the operations of the
company that have been reinvested in the existing assets of the firm.
Owner's Equity ✔✔the owner's stake in the business. This includes what is from the owner's
pocket, from stocks sold, and Retained Earnings.
2022 with Verified Solutions
Matching Principle ✔✔The revenues and the expected incurred to generate those revenues must
be reported together; a fundamental component of accrual-based accounting.
Historical Cost Principle ✔✔Items that appear on the financial statement are listed at the cost when
purchased.
Current Assets ✔✔Cash or assets that will be converted into cash within the next year.
Gross Fixed Assets ✔✔Property, Plant, and Equipment (PP&E). These are on the books at their
historical cost. This does not include accumulated depreciation (do not consider accumulated
depreciation when calculating cash flows).
Liquidity ✔✔The more liquid the asset, the more quickly it can be turned into cash; measures how
quickly an asset can be turned into cash without taking a large discount in value.
Marketable Securities ✔✔Short-term, high-quality securities such as Treasury Bills and
certificates of deposit (CDs).
Contra-Asset Account ✔✔A balance/reserve account that decreases the balance of an Accounts
Receivable (AR) account if there is doubt that all payments will be made to the firm to an amount
that they expect to collect.
Inventories ✔✔Includes raw material, work-in-progress, and finished goods. They are the least
liquid.
, Last In, First Out (LIFO) ✔✔Assumes that the last inventory items purchased by the company are
the first ones sold to customers.
First In, First Out (FIFO) ✔✔Assumes that the first units purchased are the first sold.
Historical Cost ✔✔The original purchase price.
Book Value ✔✔Historical Cost - Accumulated Depreciation
Fixed Liabilities ✔✔Obligations that require cash in the next year to pay.
Notes Payable (NP) ✔✔The borrowing of interest-bearing money from a financial institution that
the firm will owe back.
Accruals ✔✔Obligations that have been uncured but not paid, such as employee wages or utilities.
Long-Term Debt ✔✔A debt obligation with a maturity longer than one year, such as rent, office
staff, and administration costs.
Common Stock and Additional Paid-In Capital ✔✔Accounts that are generated when the firm
issues stock.
Retained Earnings (RE) ✔✔Net Income - Dividends. Money generated from the operations of the
company that have been reinvested in the existing assets of the firm.
Owner's Equity ✔✔the owner's stake in the business. This includes what is from the owner's
pocket, from stocks sold, and Retained Earnings.
