WGU C213 ACCOUNTING FOR DECISION MAKERS FINAL EXAM
STUDY GUIDE QUESTIONS AND CORRECT ANSWERS
Accounting steps. - ANSWER: 1. Prepare 2. Analyze 3. Gather 4. Make decisions 5.
Implement 6. Observe.
Managerial info is inside or outside the business? - ANSWER: Inside, Internal
True or false, managerial accounting uses BOTH managerial and financial
accounting? - ANSWER: True. Financial accounting is only outside. Managerial
accounting can be inside AND outside.
Financial is inside or outside the business? - ANSWER: Outside, External, includes
lenders and investors
The financial statement includes what 3 documents - ANSWER: Balance sheet,
income statement, and statement of cash flows
Point in time, Assets (resources) and liabilities (obligations) - ANSWER: Balance Sheet
Period of time (usually 1 year), amount of profit made - ANSWER: Income Statement
Period of time, where money came from, and where it went. Inflow and outflow of
cash (Cash Flows). Change in money for the period. - ANSWER: Statement of Cash
flows
Assets= liabilities + equity - ANSWER: Balance sheet equation
Net income=Revenue - Expenses - ANSWER: Revenue equation
The statement of cash flows includes what three activities - ANSWER: Operating,
investing, and financial activities
The decision makers in the U.S. (accounting rules) - ANSWER: FASB: Financial
accounting standards. Private, no government involvement. It is a public process,
includes individuals experienced in business and accounting (7 members).
Developed by accounting rule makers. No Legal authority. - ANSWER: GAAP: General
accepted accounting principles
We need accounting rules for... - ANSWER: comparability
U.S. gov agency responsible for ensuring that investors, creditors, and other financial
statement users are provided with reliable information. It watches behavior in
financial markets. - ANSWER: SEC: Security and exchange commission. Located in
Article 1, Sec 8, Clause 3
,What forms do the SEC regulate? - ANSWER: Registration statements (prospectus),
Form 10-K, Form 10-Q, and schedule 14A (proxy statement). These are all publicly
viewable.
What does the SEC do? - ANSWER: Oversees stock exchanges, can suspend a
company, investigate and suspect violations of the SEC rules.
Does the SEC have legal authority? - ANSWER: YES. The SEC has legal authority to
establish accounting rules and disclosure requirements.
Financial accounting rule per the US constitution - ANSWER: USA congress->SEC-
>FASB
The SEC created the - ANSWER: FASB: Financial accounting standards board
FASB created - ANSWER: GAAP (has no legal authority)
What sets auditory standards, continue education credits, CPA exam, and is the code
of professional conduct? - ANSWER: AIPCA: American INSTITUTE of certified public
accountants.
Who is the only person who can sign audit reports? - ANSWER: Only CPA's: Certified
public accountants.
The Sarbanes-Oxley Act "SOX" created? - ANSWER: PCAOB: Public company
accounting oversight board.
PCAOB is under supervision of? - ANSWER: Under supervision of the SEC.
Who appoints members, approves actions, gov standards, inspections, and
investigations? It is a private group and OVERSEES. AUDITORS? - ANSWER: PCAOB:
Public Company Accounting OVERSIGHT Board.
IRS - ANSWER: U.S. Gov agency that collects and regulates income taxes. Their
primary goal is to collect revenue.
There are two sets of books. Tax Books and Financial accounting books. - ANSWER:
Economic income and accounting income books. & Tax income, and cash flow books.
IASB: Internatonal Accounting Standard Board - ANSWER: Similar to the FASB, but
not 100% the same. It is international, everywhere but the U.S.
Barriers to international convergence are? - ANSWER: Who enforces and national
policies.
,Rules set centrally, but legally adopted and enforced locally? - ANSWER:
Condorsement
To increase government regulation, one would use: - ANSWER: The SEC, SOX, and
PCAOB.
Financial statements - ANSWER: Reduce uncertainty and allows lenders and
investors to target their financing and investing to the level of risk they are willing to
take.
A financial statement that furthermore decreases uncertainty. - ANSWER: Adudit
Provides accountants the best attempt at measuring the economic performance of a
company. - ANSWER: Income Statement
Mother of all financial statements. - ANSWER: Balance sheet
Assets=liabilities+equity - ANSWER: Accounting equation
Resources owned or controlled by a company that will provide probable future
economic benefit. - ANSWER: Assets (resoures)
Obligations that require the probable future sacrifice of economic benefits in the
form of the transfer of assets or the providing of services. - ANSWER: Liabilities
(obligations)
Investment amount in the business PLUS how much profit they have left in the
business. L-A=E - ANSWER: Equity
Owners Equity - ANSWER: 1 paid in capital, 2 retained earnings, 3 treasure stock, 4
accumulated other comprehensive income.
The amount originally paid in exchange for share of stock - ANSWER: PIC: Paid in
capital
CUMMULATIVE earnings that have been retained in the business - ANSWER:
Retained earnings
Company buys back its own shares of stock, shown as a subtraction from equity. -
ANSWER: Treasury stock
MARKET EVENTS that result in an increase or decrease in equity are: - ANSWER:
AOCI: Accumulated other comprehensive income.Market related gains and losses
that are not included on the income statement.
Breaking items down into current and long term results (current=with in one year) -
ANSWER: Classified balance sheet
, small and large businesses - ANSWER: Entity Concept
What allows property, plant, and equipment (PPE) to be reported at CURRENT
APPRISED VALUE rather than historical cost? - ANSWER: International Property rules
Are assets recorded at liquidity prices? - ANSWER: NO
The income statement contains what three things? - ANSWER: Revenue, expenses,
and net income.
Revenue-Expenses=Net Income - ANSWER: Income statement equation
Amount of assets created from the sale of goods or services. Also, REVENUE CAN BE
GENERATED BY SATISFYING LIABILITIES. One SOURCE of an asset. - ANSWER:
Revenue (gains)
Amnt of ASSETS CONSUMED in generating revenues. Expenses are also used when
liabilities are created in generating revenues. one USE of an asset. It is ONE way to
create a liability. - ANSWER: Expenses (losses)
Are Dividends located on the income statement? - ANSWER: NEVER. Divedends are
not expenses.
Overall measure of a companies economic performance during a period of time. -
ANSWER: Net income
Are revenues assets? - ANSWER: Never
Are expenses liabilities? - ANSWER: Never
Net income / outstanding number of share stock. - ANSWER: Earnings per share
(EPS)
Recognize revenue when value has been delivered to the customers. Not before or
after. - ANSWER: Revenue recognition
Statement of cash flows. Inflow of cash comes from what three activities. - ANSWER:
Operating, investing, and financing activities
Things that a business does every day hundreds of times - ANSWER: Operating
activities
NOT investing in stock or bonds. It is investing in the productive capacity of the
business. Time to time things, not usually daily, Ex: buying, selling long term assets
such as buildings, equipment, land. - ANSWER: Investing activities
STUDY GUIDE QUESTIONS AND CORRECT ANSWERS
Accounting steps. - ANSWER: 1. Prepare 2. Analyze 3. Gather 4. Make decisions 5.
Implement 6. Observe.
Managerial info is inside or outside the business? - ANSWER: Inside, Internal
True or false, managerial accounting uses BOTH managerial and financial
accounting? - ANSWER: True. Financial accounting is only outside. Managerial
accounting can be inside AND outside.
Financial is inside or outside the business? - ANSWER: Outside, External, includes
lenders and investors
The financial statement includes what 3 documents - ANSWER: Balance sheet,
income statement, and statement of cash flows
Point in time, Assets (resources) and liabilities (obligations) - ANSWER: Balance Sheet
Period of time (usually 1 year), amount of profit made - ANSWER: Income Statement
Period of time, where money came from, and where it went. Inflow and outflow of
cash (Cash Flows). Change in money for the period. - ANSWER: Statement of Cash
flows
Assets= liabilities + equity - ANSWER: Balance sheet equation
Net income=Revenue - Expenses - ANSWER: Revenue equation
The statement of cash flows includes what three activities - ANSWER: Operating,
investing, and financial activities
The decision makers in the U.S. (accounting rules) - ANSWER: FASB: Financial
accounting standards. Private, no government involvement. It is a public process,
includes individuals experienced in business and accounting (7 members).
Developed by accounting rule makers. No Legal authority. - ANSWER: GAAP: General
accepted accounting principles
We need accounting rules for... - ANSWER: comparability
U.S. gov agency responsible for ensuring that investors, creditors, and other financial
statement users are provided with reliable information. It watches behavior in
financial markets. - ANSWER: SEC: Security and exchange commission. Located in
Article 1, Sec 8, Clause 3
,What forms do the SEC regulate? - ANSWER: Registration statements (prospectus),
Form 10-K, Form 10-Q, and schedule 14A (proxy statement). These are all publicly
viewable.
What does the SEC do? - ANSWER: Oversees stock exchanges, can suspend a
company, investigate and suspect violations of the SEC rules.
Does the SEC have legal authority? - ANSWER: YES. The SEC has legal authority to
establish accounting rules and disclosure requirements.
Financial accounting rule per the US constitution - ANSWER: USA congress->SEC-
>FASB
The SEC created the - ANSWER: FASB: Financial accounting standards board
FASB created - ANSWER: GAAP (has no legal authority)
What sets auditory standards, continue education credits, CPA exam, and is the code
of professional conduct? - ANSWER: AIPCA: American INSTITUTE of certified public
accountants.
Who is the only person who can sign audit reports? - ANSWER: Only CPA's: Certified
public accountants.
The Sarbanes-Oxley Act "SOX" created? - ANSWER: PCAOB: Public company
accounting oversight board.
PCAOB is under supervision of? - ANSWER: Under supervision of the SEC.
Who appoints members, approves actions, gov standards, inspections, and
investigations? It is a private group and OVERSEES. AUDITORS? - ANSWER: PCAOB:
Public Company Accounting OVERSIGHT Board.
IRS - ANSWER: U.S. Gov agency that collects and regulates income taxes. Their
primary goal is to collect revenue.
There are two sets of books. Tax Books and Financial accounting books. - ANSWER:
Economic income and accounting income books. & Tax income, and cash flow books.
IASB: Internatonal Accounting Standard Board - ANSWER: Similar to the FASB, but
not 100% the same. It is international, everywhere but the U.S.
Barriers to international convergence are? - ANSWER: Who enforces and national
policies.
,Rules set centrally, but legally adopted and enforced locally? - ANSWER:
Condorsement
To increase government regulation, one would use: - ANSWER: The SEC, SOX, and
PCAOB.
Financial statements - ANSWER: Reduce uncertainty and allows lenders and
investors to target their financing and investing to the level of risk they are willing to
take.
A financial statement that furthermore decreases uncertainty. - ANSWER: Adudit
Provides accountants the best attempt at measuring the economic performance of a
company. - ANSWER: Income Statement
Mother of all financial statements. - ANSWER: Balance sheet
Assets=liabilities+equity - ANSWER: Accounting equation
Resources owned or controlled by a company that will provide probable future
economic benefit. - ANSWER: Assets (resoures)
Obligations that require the probable future sacrifice of economic benefits in the
form of the transfer of assets or the providing of services. - ANSWER: Liabilities
(obligations)
Investment amount in the business PLUS how much profit they have left in the
business. L-A=E - ANSWER: Equity
Owners Equity - ANSWER: 1 paid in capital, 2 retained earnings, 3 treasure stock, 4
accumulated other comprehensive income.
The amount originally paid in exchange for share of stock - ANSWER: PIC: Paid in
capital
CUMMULATIVE earnings that have been retained in the business - ANSWER:
Retained earnings
Company buys back its own shares of stock, shown as a subtraction from equity. -
ANSWER: Treasury stock
MARKET EVENTS that result in an increase or decrease in equity are: - ANSWER:
AOCI: Accumulated other comprehensive income.Market related gains and losses
that are not included on the income statement.
Breaking items down into current and long term results (current=with in one year) -
ANSWER: Classified balance sheet
, small and large businesses - ANSWER: Entity Concept
What allows property, plant, and equipment (PPE) to be reported at CURRENT
APPRISED VALUE rather than historical cost? - ANSWER: International Property rules
Are assets recorded at liquidity prices? - ANSWER: NO
The income statement contains what three things? - ANSWER: Revenue, expenses,
and net income.
Revenue-Expenses=Net Income - ANSWER: Income statement equation
Amount of assets created from the sale of goods or services. Also, REVENUE CAN BE
GENERATED BY SATISFYING LIABILITIES. One SOURCE of an asset. - ANSWER:
Revenue (gains)
Amnt of ASSETS CONSUMED in generating revenues. Expenses are also used when
liabilities are created in generating revenues. one USE of an asset. It is ONE way to
create a liability. - ANSWER: Expenses (losses)
Are Dividends located on the income statement? - ANSWER: NEVER. Divedends are
not expenses.
Overall measure of a companies economic performance during a period of time. -
ANSWER: Net income
Are revenues assets? - ANSWER: Never
Are expenses liabilities? - ANSWER: Never
Net income / outstanding number of share stock. - ANSWER: Earnings per share
(EPS)
Recognize revenue when value has been delivered to the customers. Not before or
after. - ANSWER: Revenue recognition
Statement of cash flows. Inflow of cash comes from what three activities. - ANSWER:
Operating, investing, and financing activities
Things that a business does every day hundreds of times - ANSWER: Operating
activities
NOT investing in stock or bonds. It is investing in the productive capacity of the
business. Time to time things, not usually daily, Ex: buying, selling long term assets
such as buildings, equipment, land. - ANSWER: Investing activities
