WGU C213 ACCOUNTING UPDATED CORE EXAMINATION
QUESTIONS AND ANSWERS SURE A+
✔✔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.
✔✔The Public Company Accounting Oversight Board (PCAOB) - ✔✔inspects the audit
practices of registered audit firms and has statutory authority to investigate questionable
audit practices and to impose sanctions such as barring an audit firm from auditing
SEC-registered companies.
✔✔The Internal Revenue Service (IRS) - ✔✔establishes rules to define exactly when
income should be taxed. It has no role in setting financial accounting rules; and a
company's financial statements are not used in determining how much tax the company
must pay.
✔✔The International Accounting Standards Board (IASB) - ✔✔was formed to develop a
common set of worldwide accounting standards. IASB standards are increasingly
accepted worldwide, but FASB rules are still the standard in the United States.
✔✔Three factors have combined to make right now a time of significant change in
accounting. The three factors are - ✔✔the rapid advance in information technology, the
international integration of worldwide business, and the increased scrutiny associated
with the large corporate accounting scandals.
✔✔SOX - ✔✔was created in response to wave of accounting scandals starting in 2001
and which increases U.S. federal government scrutiny of the production of financial
statements.
✔✔Liabilities are - ✔✔formally defined as "probable future sacrifices of economic
benefits arising from present obligations of a particular entity to transfer assets or
provide services to other entities in the future as a result of past transactions or events.
✔✔By increasing the information available about a company, - ✔✔financial statements
make it easier for a company to attract investors, lenders, and other parties interested in
the company's financial status.
✔✔The balance sheet - ✔✔reports a company's financial position at a specified point in
time and lists the company's resources (assets), obligations (liabilities), and net
ownership interest (owners' equity).
, ✔✔Assets are - ✔✔probable future economic benefits obtained or controlled by a
company as a result of past transactions or events. Liabilities are probable future
sacrifices of economic benefits arising from present obligations of a company to transfer
assets or provide services in the future as a result of past transactions or events.
Owners' equity is the residual interest in the assets of a company that remains after
deducting its liabilities. By definition, Assets = Liabilities + Owners' Equity; this
relationship is called the accounting equation.
✔✔For a corporation, owners' equity is called - ✔✔tockholders' equity. Stockholders can
invest in a corporation in two ways. First, they can directly invest cash or other assets
as paid-in capital. Second, they can allow the corporation to keep a portion of the profits
for reinvestment in the business; these profits are called retained earnings.
✔✔Assets are usually listed in - ✔✔a balance sheet in order of liquidity, with the most
liquid asset—cash—shown first and the least liquid assets—intangible assets—shown
last. Liabilities are separated into those to be paid soon (current liabilities) and those to
be paid later (long-term liabilities). Balance sheets are usually presented in a
comparative format with at least two years of data provided.
✔✔The entity concept states that - ✔✔the financial results of an economic entity should
be reported separately from the financial results of other entities, even though all those
entities may be controlled by the same person. With large corporations, identifying the
extent of the economic "entity" can be quite difficult. Accountants frequently report
assets at their historical cost rather than their current value, resulting in companies'
reported accounting values often being less than their market values. Accountants
assume that a company is a going concern, so assets don't have to be reported in the
balance sheet at liquidation value.
✔✔The income statement describes - ✔✔a company's financial performance for a
period of time. A company's expenses are subtracted from its revenues in computing
net income.
✔✔Revenues are - ✔✔the amount of assets generated in the normal course of
business; expenses are the amount of assets consumed in doing business. An income
statement also reports gains and losses that result from activities outside a company's
normal business operations. An additional number reported in the income statement is
earnings per share, which is the amount of net income divided by the number of shares
of stock outstanding.
✔✔Revenue recognition is - ✔✔the accounting process used to determine when
revenue should be reported in the income statement. Revenue should be recognized
when work has been done and when collectibility of cash is reasonably assured.
QUESTIONS AND ANSWERS SURE A+
✔✔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.
✔✔The Public Company Accounting Oversight Board (PCAOB) - ✔✔inspects the audit
practices of registered audit firms and has statutory authority to investigate questionable
audit practices and to impose sanctions such as barring an audit firm from auditing
SEC-registered companies.
✔✔The Internal Revenue Service (IRS) - ✔✔establishes rules to define exactly when
income should be taxed. It has no role in setting financial accounting rules; and a
company's financial statements are not used in determining how much tax the company
must pay.
✔✔The International Accounting Standards Board (IASB) - ✔✔was formed to develop a
common set of worldwide accounting standards. IASB standards are increasingly
accepted worldwide, but FASB rules are still the standard in the United States.
✔✔Three factors have combined to make right now a time of significant change in
accounting. The three factors are - ✔✔the rapid advance in information technology, the
international integration of worldwide business, and the increased scrutiny associated
with the large corporate accounting scandals.
✔✔SOX - ✔✔was created in response to wave of accounting scandals starting in 2001
and which increases U.S. federal government scrutiny of the production of financial
statements.
✔✔Liabilities are - ✔✔formally defined as "probable future sacrifices of economic
benefits arising from present obligations of a particular entity to transfer assets or
provide services to other entities in the future as a result of past transactions or events.
✔✔By increasing the information available about a company, - ✔✔financial statements
make it easier for a company to attract investors, lenders, and other parties interested in
the company's financial status.
✔✔The balance sheet - ✔✔reports a company's financial position at a specified point in
time and lists the company's resources (assets), obligations (liabilities), and net
ownership interest (owners' equity).
, ✔✔Assets are - ✔✔probable future economic benefits obtained or controlled by a
company as a result of past transactions or events. Liabilities are probable future
sacrifices of economic benefits arising from present obligations of a company to transfer
assets or provide services in the future as a result of past transactions or events.
Owners' equity is the residual interest in the assets of a company that remains after
deducting its liabilities. By definition, Assets = Liabilities + Owners' Equity; this
relationship is called the accounting equation.
✔✔For a corporation, owners' equity is called - ✔✔tockholders' equity. Stockholders can
invest in a corporation in two ways. First, they can directly invest cash or other assets
as paid-in capital. Second, they can allow the corporation to keep a portion of the profits
for reinvestment in the business; these profits are called retained earnings.
✔✔Assets are usually listed in - ✔✔a balance sheet in order of liquidity, with the most
liquid asset—cash—shown first and the least liquid assets—intangible assets—shown
last. Liabilities are separated into those to be paid soon (current liabilities) and those to
be paid later (long-term liabilities). Balance sheets are usually presented in a
comparative format with at least two years of data provided.
✔✔The entity concept states that - ✔✔the financial results of an economic entity should
be reported separately from the financial results of other entities, even though all those
entities may be controlled by the same person. With large corporations, identifying the
extent of the economic "entity" can be quite difficult. Accountants frequently report
assets at their historical cost rather than their current value, resulting in companies'
reported accounting values often being less than their market values. Accountants
assume that a company is a going concern, so assets don't have to be reported in the
balance sheet at liquidation value.
✔✔The income statement describes - ✔✔a company's financial performance for a
period of time. A company's expenses are subtracted from its revenues in computing
net income.
✔✔Revenues are - ✔✔the amount of assets generated in the normal course of
business; expenses are the amount of assets consumed in doing business. An income
statement also reports gains and losses that result from activities outside a company's
normal business operations. An additional number reported in the income statement is
earnings per share, which is the amount of net income divided by the number of shares
of stock outstanding.
✔✔Revenue recognition is - ✔✔the accounting process used to determine when
revenue should be reported in the income statement. Revenue should be recognized
when work has been done and when collectibility of cash is reasonably assured.
