Accounting for Decision Makers, Exams of Accounting

Download Accounting for Decision Makers and more Exams Accounting in PDF only on Docsity! WGU C213 Accounting for Decision Makers Question and Answers 2023 Latest Exam Update Highly Verified Top Rated. Accounting - answers 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 - answers the preservation of a systematic, quantitative record of an activity accounting system - answers used by a business to handle routine bookkeeping tasks and to structure the information so it can be used to evaluate the performance and financial status of the business Accounting information - answers Info that is intended to be useful in making decisions about the future. The balance sheet, the income statement, and the statement of cashflows - answers What are the three primary financial statements? External Users - answers Who is financial accounting information primarily prepared for and used by? pg. 1 Managerial Accounting - answers the name given to accounting systems designed for internal users Balance Sheet - answers Reports a company's assets, liabilities, and owners' equity Income Statement - answers reports the amount of net income earned by a company during a period Net income - answers the excess of a company's revenues over its expenses statement of cash flows - answers reports the amount of cash collected and paid out by a company in the following three types of activities: operating, investing, and financing FASB - answers Which private body establishes accounting rules in the U.S.? Financial Accounting Standards Board (FASB) - answers a private body established and supported by the joint efforts of the U.S. business community, financial analysts, and practicing accountants The Securities and Exchange Commission (SEC) - answers the organization that 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 are hiding or manipulating financial data pg. 2 Current and Long-term - answers Liabilities are divided into which 2 categories on the balance sheet? 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 - answers What is the entity concept? (revenues-expense= net income) - answers Equation to calculate net income When work has been done and collectability of cash can be reasonably assured - answers According to accounting rules, when should revenue be recognized? Operating activities - answers those activities that comprise the day-to-day operations of a business. Investing activities - answers The purchase and sale of long-term assets such as land and equipment are known as _______________. Financing activities - answers those activities through which cash is obtained from, or repaid to, creditors and investors information on the accounting assumptions used in preparing the statements and supplemental information not included in the statements themselves - answers What information do the notes to accounting statements provide? pg. 5 1. Summary of accounting policy 2. Additional info about summary totals 3. Disclosure of info not included in summary 4. Supplemental disclosure required by FASB or SEC - answers What are the 4 general types of accounting notes? Conservatism - answers the practice of recognizing all losses but not recognizing gains until they are certain Materiality - answers the concept that weighs whether a certain dollar amount is large enough to make a difference to anyone Articulation - answers the idea that the three primary financial statements are interrelated Debt Ratio Total Liabilities/ Total Assets - answers Percentage of funds needed to purchase assets that were obtained through borrowing Current Ratio pg. 6 Current Assets/ Current Liabilities - answers Measure of liquidity; number of times current assets could cover current liabilities Return on Sales Ratio Net Income/ Sales - answers Number of pennies earned during the year on each dollar of sales Asset Turnover Sales/ Total Assets - answers Number of dollars of sales during the year generated by each dollar of assets Return on Equity Net Income/ Stockholder's Equity - answers Number of pennies earned during the year on each dollar invested Price-earnings Ratio pg. 7 Common stockholders are the true owners of a business; Preferred stockholders give up some of the rights of ownership enjoyed by common stockholders in exchange for some of the safety promised to creditors - answers What is the difference between a common stockholder and a preferred stockholder? Retained Earnings - answers the cumulative amount of corporate profits that have been retained within the business rather than being paid out to stockholders as dividends treasury stock - answers the amount the corporation has spent to buy back its own shares from stockholders 2 years, Comparative side-by-side format - answers How many years worth of balance sheets does a company usually provide and how are they typically formatted? Cash - answers What is the first item that is usually listed on a U.S. balance sheet? Long-term assets - answers What is the first item that is usually listed on a non-U.S. balance sheet? working capital - answers The difference of current assets-current liabilities pg. 10 Recognition (In terms of accounting) - answers the process of condensing all estimates and judgments into one number and reporting that one number in the formal financial statements disclosure - answers An alternative way to report information, describing details in a narrative note Transaction Analysis - answers is the process of determining how an economic event impacts financial statements Asset Mix - answers the proportion of total assets in each asset category that is largely determined by the industry in which the company operates Income from Continuing Operations - answers What is the best measure of sustainable profitability? Gross Profit - answers the difference between the selling price of a product and the cost of the product Operating Income - answers gross profit minus all other expenses except for interest and taxes; measures the performance of the fundamental business operations conducted by a company Income from Continuing Operations - answers operating income minus interest expense, minus income tax expense, and plus or minus other pg. 11 miscellaneous revenue and expense items, and gains and losses from peripheral transactions and events Net Income - answers income from continuing operations plus or minus the results of discontinued operations and extraordinary items, net of their respective income tax effects Comprehensive Income - answers net income plus or minus adjustments for changes in company wealth stemming from changes in certain exchange rates, interest rates, or financial instruments' values Gains, Losses, Revenues, and Expenses - answers What are the 4 primary item categories listed on the income statement? selling goods, providing services, Earning interest by providing loans - answers What are some common business activities that generate revenue? cost of goods sold; selling, general, and administrative expense, depreciation expense, income tax expense, and interest expense - answers What are the key expense items commonly found on the income statement? External - answers Do gains/losses reported on the income statement arise from internal or external activities? Income from discontinued operations and extraordinary items - answers Which items are considered "below-the-line" items? pg. 12