WGU C215 Study Guide - FINAL

Accounting for Decision Makers - C213 Leave the first rating Students also studied Terms in this set (572) Save WGU C215 Study Guide - FINAL 218 terms kenneth4831Preview C215 Teacher 119 terms Mallory_Price626 Preview WGU c213 study guide 112 terms jayrob13Preview Acc 20 103 term cam Bookkeepingis the preservation of a systematic, quantitative record of an activity AccountingA system of providing "quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions."

The key features of this definition are the following:

Numbers: Accounting is quantitative. This is a strength because numbers can be

easily tabulated and summarized. It is a weakness because some important business events, such as a toxic waste spill and the associated lawsuits and countersuits, cannot be easily described by one or two numbers.A financial dimension: The status and performance of a business is affected by and reflected in many dimensions—financial, personal relationships, community and environmental impact, and public image. Accounting focuses on just the financial dimension.Usefulness: The practice of accounting is supported by a long tradition of theory; U.S. accounting rules in fact have a theoretical conceptual framework, and some people actually make a living as accounting theorists. However, in spite of its theoretical beauty, accounting exists only because it is useful.Future decisions based on past information: Although accounting is the structured reporting of what has already occurred, this past information can only be useful if it impacts decisions about the future.financial accountingwhich is the name given to accounting information provided for and used by external users.Managerial accountingthe name given to accounting systems designed for internal users financial statementsThe three primary financial information documents: the balance sheet, income statement, and statement of cash flows.

balance sheetreports the resources of a company (the assets), the company's obligations (the liabilities), and the owners' equity, which represents how much money has been invested in the company by its owners.income statementThis document reports the amount of net income earned by a company during a period, with annual and quarterly income statements being the most common.statement of cash flowsThis document reports the amount of cash collected and paid out by a company in the following three types of activities: operating, investing, and financing.The emphasis in financial accounting is on which of the following external user groups?Investors and creditors The primary internal group that uses accounting information is Management Internal reports are generally used byManagement Which of the following is NOT an external user of financial information?Management accounting standards are set by the?Financial Accounting Standards Board (FASB). The FASB is based in Norwalk, Connecticut; its seven full-time members are selected from a variety of backgrounds—professional accounting, business, government, and academia.FASB is not a government agency, it lacks the legal power to enforce the accounting standards it sets.Generally Accepted Accounting Principles (GAAP) a set of accounting standards that is used in the preparation of financial statements Which of the following is NOT true of the Financial Accounting Standards Board (FASB)?It is a government agency Generally accepted accounting principles areDeveloped by accounting rule makers The initials GAAP stand forGenerally Accepted Accounting Principles The current standard-setting board for accounting in the private sector is the Financial Accounting Standards Board (FASB) Securities and Exchange Commission (SEC)Congress created the Securities and Exchange Commission (SEC) to regulate U.S.stock exchanges.The SEC is not charged with protecting investors from losing money; instead, it 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.What is corporate governance?Corporate Governance is the set of principles and practices that a corporation uses to regulate the relationship between the shareholders and the professional managers hired by the board of directors.

The label "CPA" has two different usesfor individuals who are CPAs and for CPA firms.CPA firms are also hired to perform independent audits of a company's financial statements. The important role of an independent audit in ensuring the reliability of financial statements is discussed in our "Overview of the Financial Statements."not all CPAs work as accountants; they work in law firms or for the CIA and as business consultants, corporate managers, and even accounting professors.Certified Public Accountant (CPA)A person who has taken a minimum number of college-level accounting classes, has passed the dreaded CPA exam, and has met other requirements set by his or her state.American Institute of Certified Public Accountants

(AICPA)

the professional organizations of certified public accountants in the United States.Like other professional organizations (e.g., the American Medical Association and the American Bar Association), the AICPA provides continuing educational service to its members and also acts as a political voice to lobby on behalf of its membership. The AICPA is responsible for preparing and grading the CPA examination in addition to maintaining the integrity of the accounting profession through its Code of Professional Conduct.Section 101 of the Sarbanes-Oxley Act created the Public Company Accounting Oversight Board (PCAOB).Public Company Accounting Oversight Board (PCAOB)a private, non-profit organization, but it effectively serves as an arm of the SEC in registering, inspecting, and disciplining the auditors of all publicly traded companies. The SEC appoints the chairperson and members of the PCAOB. Like the FASB, the PCAOB is funded by registration fees paid by all publicly traded companies in the United States.Internal Revenue Service (IRS)The branch of the U.S. Treasury Department in charge of collecting taxes International Accounting Standards Board (IASB) An international accounting standard-setting body responsible for the convergence of accounting standards worldwide.was formed in 1973 to develop worldwide accounting standards.In 2001, the IASB restructured itself as an independent body with closer links to national standard-setting bodies. At that time the IASB adopted its current name and dropped its original name, the International Accounting Standards Committee (IASC).International Accounting Standards Committee (IASC) International Accounting Standards Board (IASB) International Financial Reporting Standards (IFRS) Accounting standards, issued by the IASB, that have been adopted by many countries outside of the United States.Which of the following is the government agency that stipulates the rules and regulations that govern the collection of taxes in the United States?Internal Revenue Service The organization that develops worldwide accounting standards is the International Accounting Standards Board (IASB) Standards established by the International Accounting Standards Board are referred to as International Financial Reporting Standards

Which of the following is NOT a service typically provided by large public accounting firms?Making management decisions Which of the following organizations has specific legal authority to establish accounting standards for publicly held companies?Securities and Exchange Commission (SEC) Which of the following is NOT a reason for the integration of worldwide accounting standards?the theoretical necessity of a common set of accounting standards The International Accounting Standards Board (IASB) is charged with developing worldwide accounting practices?True With the current state of information technology, investors outside a company are now allowed access to a company's internal database of financial information and do their own customized analysis of a firm's performance.False - While the technology may be available, companies are still not allowing outsiders access to their internal accounting records.Increased federal oversight of the audit process resulted from the passage of the following act of Congress - Sarbanes-Oxley Act 1.7 Review of Key PointsAccounting 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.The focus of financial accounting is the three primary financial statements: the balance sheet, the income statement, and the statement of cash flows.Among the users of financial accounting information are lenders, investors, company management, suppliers, customers, employees, competitors, government agencies, politicians, and the press.The practice of accounting involves adherence to the established accounting rules as well as the use of judgment. U.S. accounting rules are established by the FASB.In addition to the FASB, other important accounting-related organizations are the SEC, the AICPA, the PCAOB, the IRS, and the IASB.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.A borrower benefits from providing financial information regarding income and expenses in the form of a lower interest rate on the loan because of reduced uncertainty for the lender with regard to repayment.True Which of the following is NOT one of the three primary financial statements?The Statement of Retained Earnings One reason for a company's preparing and providing financial statements is to reduce uncertainty for an investor regarding the firm's future financial performance.True