WGU C213 Accounting for Decision Makers Latest Updated

Accounting - Answer A system of providing "quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions." Accounting Equation - Answer Assets = Liabilities + Owners' Equity Accounts Payable - Answer The flip side of accounts receivable—when one company sells on credit, creating for itself an account receivable, the company on the other side of the transaction is buying on credit, creating an account payable. Accounts Receivable - Answer Amounts owed to a business by its credit customers and are usually collected in cash within 10 to 60 days. Accrual Accounting - Answer The process that accountants use in adjusting raw transaction data into refined measures of a firm's economic performance. Accumulated Depreciation - Answer Reflects the wear and tear, or depreciation, of these items since they were originally purchased. Accumulated Other Comprehensive Income - Answer The grouped together and reported changes which companies experience increases and decreases in equity each year because of the movement of market prices or exchange rates Activity-based Costing (ABC) - Answer A method of attributing overhead costs to products based on measurable factors that relate to activities that create overhead costs. Additional Paid-in Capital - Answer Invested by stockholders that exceeds the par value of the issued shares. American Institute of Certified Public Accountants (AICPA) - Answer The professional organization of certified public accountants in the United States. Asset - Answer Probable future economic benefit obtained or controlled by a particular entity as a result of past transactions or events. Asset Mix - Answer The proportion of total assets in each asset category, is determined to a large degree by the industry in which the company operates. Asset Turnover - Answer Sales divided by assets and is interpreted as the number of dollars in sales generated by each dollar of assets. Assets - Answer Assets are the firm's economic resources, formally defined as "probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events Assets-to-equity Ratio - Answer Assets divided by equity and is interpreted as the number of dollars of assets acquired for each dollar invested by stockholders. Audit Committee - Answer Members of a company's board of directors who are responsible for dealing with the external and internal auditors. Average Collection Period - Answer Shows the average number of days that elapse between sale and cash collection. Balance Sheet - Answer A listing of an organization's assets and of its liabilities at a certain time. Batch-level Activities - Answer Activities that take place in order to support a batch or production run, regardless of the size of the batch. (starting & stopping, small productions runs = higher cost even if the total amount produced stays the same) Book Value - Answer The book value of an asset is the asset's cost minus the asset's accumulated depreciation. Bookkeeping - Answer The preservation of a systematic, quantitative record of an activity. Break-even Point - Answer The amount of sales at which total costs of the number of units sold equal total revenues; the point at which there is no profit or loss. Capital Budgeting - Answer Systematic planning for long-term investments in operating assets. Capital Lease Obligations - Answer A long-term liability in the balance sheet. Cash - Answer Coins and currency as well as the balances in company checking and savings accounts. Cash Budget - Answer An important tool in helping management plan its cash needs. Cash Equivalents - Answer Short-term, highly liquid investments such as Treasury bills, commercial paper, and money market funds. Cash Flow Adequacy Ratio - Answer Cash from operations divided by expenditures for fixed asset additions and acquisitions of new businesses Cash Times Interest Earned Ratio - Answer A financial analysis tool that indicates the interest payment ability of an entity Certified Public Accountant - Answer 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. Common Stock - Answer Stockholders' equity investment Common-size Financial Statements - Answer All amounts for a given year being shown as a percentage of that denominator for the year. Comparability - Answer Tnformation that becomes much more useful when it can be related to a benchmark or standard Comprehensive Income - Answer The number used to reflect an overall measure of the change in a company's wealth during the period Conservatism - Answer a pervasive factor in accounting, can be summarized as follows: When in doubt, recognize all losses but don't recognize any gains. Consistency - Answer The consistency principle states that, once you adopt an accounting principle or method, continue to follow it consistently in future accounting periods. Contribution Margin - Answer The difference between total sales and variable costs; the portion of sales revenue available to cover fixed costs and provide a profit. Contribution Margin Ratio - Answer The percentage of net sales revenue left after variable costs are deducted; the contribution margin divided by net sales revenue. Control Activities - Answer Policies and procedures used by management to meet their objectives. Control Environment - Answer The actions, policies, and procedures that reflect the overall attitudes of top management about control and its importance to the entity. Control Procedures - Answer Policies and procedures used by management to meet their objectives. Controlling - Answer Implementing management plans and identifying how plans compare with actual performance. Cost Behavior - Answer The way a cost is affected by changes in activity levels. Cost Drivers - Answer Numerical measure used to reflect the amount of a specific cost that is associated with a particular activity. Cost Pool - Answer Total cost being generated by a specific overhead cost activity. Cost of Goods Sold - Answer When a business sells goods to customers, the cost of the goods sold is recorded as an expense Cost-volume-profit (C-V-P) Analysis - Answer Techniques for determining how changes in revenues, costs, and level of activity affect the profitability of an organization. Current Assets - Answer Cash, accounts receivable, and inventory. Current Liabilities - Answer Those obligations expected to be paid within one year, the most common being accounts payable. Current Portion of Long-term Debt - Answer Some liabilities, such as mortgages, are payable in equal monthly installments over a specified number of years. The portion of these liabilities that is payable within 12 months from the balance sheet date. Current Ratio - Answer A comparison of current assets (cash, receivables, and inventory) with current liabilities. It is computed by dividing total current assets by total current liabilities. Debt Ratio - Answer A frequently used measure of leverage, computed as total liabilities divided by total assets. Debt-to-equity Ratio - Answer Total liabilities divided by total equity and is interpreted as the number of dollars of borrowing for each dollar of equity investment Deferred Income Tax Liability - Answer The income tax expected to be paid in future years on income that has already been reported in the income statement but which, because of the tax law, has not yet been taxed. Derivative - Answer A financial instrument, such as an option or a future, that derives its value from the movement of a price, an exchange rate, or an interest rate associated with some other item. Detective Controls - Answer Internal control activities that are designed to detect the occurrence of errors and fraud. Differential Costs - Answer Future costs that change as a result of a decision; also called incremental or relevant costs. Direct Costs - Answer Costs that are specifically traceable to a unit of business or segment being analyzed. Direct Labor - Answer Wages paid to those who physically work on direct materials to transform them into a finished product and are traceable to specific products. Direct Materials - Answer Materials that become part of the product and are traceable to it. Direct Method - Answer reporting the information contained in the last column of the adjustment worksheet Disclosure - Answer Convey the details in a narrative note without ever including anything in the financial statements themselves. Discontinued Operations - Answer A company makes a decision to simply get out of a certain line of business completely. DuPont Framework - Answer A systematic approach to identifying general factors causing ROE to deviate from normal. EPS - Answer What tells the owner of one share of stock what he or she really wants to know Earnings Per Share (EPS) - Answer The amount of net income associated with each share of stock. Economic Value Added - Answer A system of earnings-based compensation Entity Concept - Answer The idea that personal financial activity is kept separate from business financial activity Equity - Answer Residual interest in the assets of an entity that remains after deducting its liabilities. Evaluating - Answer Analyzing results, rewarding performance, and identifying problems. Executory Contract - Answer It is an exchange of promises about the future. Expanded Accounting Equation - Answer Assets = Liabilities + Paid-in Capital + (Revenues - Expenses - Dividends) Expenses - Answer The value of resources used in generating the reported revenue. External Auditors - Answer Independent CPAs who are retained by organizations to perform audits of financial statements. Extraordinary Items - Answer Gains and losses that result from transactions that are both unusual in nature and infrequent in occurrence Facility Support Activities - Answer Activities necessary to have a facility in order to participate in the development and production of products or services; activities are not related to any particular line of products or services. (do NOT increase as production increases) Financial Accounting - Answer The name given to accounting information provided for and used by external users. Financial Capital Maintenance - Answer The approach that accountants typically use in computing a company's income in which inflation is ignored and a company is said to have income when its financial resources increase. Financial Ratios - Answer Relationships between financial statement amounts Financial Statement Analysis - Answer Areas in which additional data must be gathered, including details of significant transactions, market share information, competitors' plans, and customer demand forecasts. Financial Statements - Answer The three primary financial information documents: the balance sheet, income statement, and statement of cash flows. Financing Activities - Answer Obtaining resources from owners and providing them a return on their investment, and obtaining resources from creditors and repaying those borrowings Financing Mix - Answer The percentage of total financing (liabilities plus equity) in each individual category. Fixed Asset Turnover - Answer Sales divided by average fixed assets and is interpreted as the number of dollars in sales generated by each dollar of fixed assets. Fixed Costs - Answer Costs that remain constant in total, regardless of activity level, at least over a certain range of activity. GAAP Oval - Answer A diagram that represents the flexibility a manager has, within GAAP, to report one earnings number from among many possibilities based on different methods and assumptions. Gain - Answer The amount of a company makes money on activities that are peripheral to its primary operations Gains - Answer Refers to money made on activities outside the normal business of a company Generally Accepted Auditing Standards (GAAS) - Answer Auditing standards developed by the PCAOB for public companies and AICPA for private companies. Going Concern Assumption - Answer allows the readers of financial statements to assume that the company will continue on long enough to carry out its objectives and commitments. Gross Profit - Answer The difference between the selling price of the product and the cost of the product. High-low Method - Answer A method of segregating the fixed and variable components of a mixed cost by analyzing the costs at the highest and the lowest activity levels within a relevant range. Historical Cost Convention - Answer An accounting technique that values an asset for balance sheet purposes at the price paid for the asset at the time of its acquisition Income From Continuing Operations - Answer the segments of a company's business that it considers to be normal, and expects to operate in for the foreseeable future Income Smoothing - Answer The practice of carefully timing the recognition of revenues and expenses to even out the amount of reported earnings from one year to the next. Income Statement - Answer A company's financial performance for a specified period of time. Independent Checks - Answer Procedures for continual internal verification of other controls. Indirect Costs - Answer Costs normally incurred for the benefit of several segments within the organization; sometimes called common costs or joint costs. Indirect Labor - Answer Labor that is necessary to a manufacturing or service business but is not directly related to the actual production of the product. Indirect Materials - Answer Materials that are necessary to a manufacturing or service business but are not directly included in or are not a significant part of the actual product. Indirect Method - Answer A method for creating a statement of cash flows a company may use during any given reporting period. The indirect method uses accrual accounting information to present the cash flows from the operations section of the cash flow statement. Intangible Assets - Answer Assets that have no physical or tangible characteristics. Internal Auditors - Answer An independent group of experts (in controls, accounting, and operations) who monitor operating results and financial records, evaluate internal controls, assist with increasing the efficiency and effectiveness of operations, and detect fraud. Internal Control Structure - Answer Policies and procedures established to provide management with reasonable assurance that the objectives of an entity will be achieved. Internal Earnings Targets - Answer Financial goals established within a company. Internal Revenue Service (IRS) - Answer The government agency responsible for tax collection and tax law enforcement. International Accounting Standards Board (IASB) - Answer An independent, international body formed to develop worldwide accounting standards. International Financial Reporting Standards (IFRS) - Answer The accounting standards produced by the IASB. Inventory - Answer The name given to goods held for sale in the normal course of business. Investing Activities - Answer Cash inflows and outflows from (1) acquiring and selling productive assets such as property, plant, and equipment, (2) acquiring and selling investment securities, and (3) lending money and collecting on those loans Investment Securities - Answer Composed of publicly traded stocks and bonds. Leverage - Answer Borrowing that allows a company to purchase more assets than its stockholders are able to pay for through their own investment. Liabilities - Answer the future sacrifices of economic benefits that the entity is presently obliged to make to other entities as a result of past transactions or other past events Liability - Answer Probable future sacrifice of economic benefit arising from a present obligation of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. Liquidity - Answer A company's ability to pay its debts in the short run Liquidity - Answer the ease with which the item can be turned into cash Long-term Debt - Answer Long-term notes, bonds, mortgages, and similar obligations on the balance sheet Long-term Investments - Answer Those assets that you expect to still be around next year when you prepare the balance sheet again. Loss - Answer The amount a company loses on activities that are peripheral to its primary operations Losses - Answer Refers to money lost on activities outside the normal business of a company Managerial Accounting - Answer The name given to accounting systems designed for internal users. Manufacturing Overhead - Answer All costs incurred in the manufacturing process other than direct materials and direct labor. Margin - Answer The profitability of each dollar in sales Matching - Answer The concept typically used in practice to determine when an expense should be recognized Materiality - Answer the question of whether an item is large enough to make any difference to anyone Visual-fit Method - Answer A method of segregating the fixed and variable components of a mixed cost by plotting on total costs at several activity levels and drawing a regression line through the points. (scattergraph) Mixed Costs - Answer Costs that contain both variable and fixed costs components. Multiple-step Income Statement - Answer The multi-step income statement includes multiple sub-totals within the income statement. Net Assets - Answer total assets minus total liabilities. In a sole proprietorship the amount of net assets is reported as owner's equity. In a corporation the amount of net assets is reported as stockholders' equity. Net Income - Answer The accountant's attempt to summarize in one number the overall economic performance of a company for a given period. Net Loss - Answer the difference between revenues and expenses. If revenues exceed expenses, net income results. If, on the other hand, expenses exceed revenues, there will be a net loss Non-cash Investing and Financing Activities - Answer Some investing and financing activities affect a company's financial position but not the company's cash flows during the period. Noncontrolling Interest - Answer Arises when a corporation has subsidiaries that are not 100 percent owned by the corporation. Notes to Financial Statements - Answer These provide additional information pertaining to a company's operations and financial position and are considered to be an integral part of the financial statements. Number of Days' Sales in Inventories - Answer Calculated by dividing average inventory by average daily cost of goods sold and is interpreted as the average number of days of sales that can be made using only the supply of inventory on hand. Operating Activities - Answer All transactions relating to a company's delivering or producing its goods for sale and providing its services Operating Income - Answer Measures the performance of the fundamental business operations conducted by a company and is computed as gross profit minus operating expenses except for interest and taxes. Operating Leverage - Answer The extent to which fixed costs replace variable costs as part of a company's cost structure; the higher the proportion of fixed costs to variable costs, the faster income increases or decreases with changes in sales volume. Operational Budgeting - Answer Managerial planning decisions regarding current and immediate future (a year or less) operations that are characterized by regularity and frequency. Opportunity Costs - Answer The benefits lost or forfeited as a result of selecting one alternative course of action over another. Organizational Structure - Answer Lines of authority and responsibility. "Other Assets" - Answer Long-term assets that are not suitable for reporting under any of the previous classifications Out-of-pocket Costs - Answer Costs that require an outlay of cash or other resources. Owners' Equity - Answer The owners' residual interest in the assets of a firm. Paid-in Capital - Answer The value of the assets given in exchange for shares of stock. Par Value - Answer The market value of the shares at issuance. Per-unit Contribution Margin - Answer The excess of the sales price of one unit over its variable costs. Period Costs - Answer Costs not directly related to a product, service, or asset. They are charged as expenses to the income statement in the period in which they are incurred. Physical Capital Maintenance - Answer income is earned only when one experiences an increase in actual physical resources. Physical Safeguards - Answer Physical precautions used to protect assets and records. Planning - Answer Outlining the activities that need to be performed for an organization to achieve its objectives. Preferred Stock - Answer Stockholders' equity investment Prepaid Expenses - Answer Payments in advance for business expenses. Preventative Controls - Answer Internal control activities that are designed to prevent the occurrence of errors and fraud. Price-earnings Ratio - Answer an equity valuation multiple. It is defined as market price per share divided by annual earnings per share. Pro Forma - Answer A prediction of what the actual cash flow statement will look like in future years if the operating, investing, and financing plans are implemented. Product Costs - Answer Costs associated with products or services offered. Product-line Activities - Answer Activities that take place in order to support a product line, regardless of the number of batches or individual units produced. (production complexity) Production Prioritizing - Answer Management's continual evaluation of various product lines and divisions' profitability in order to analyze and identify opportunities to improve profits. Profit Graph - Answer A graph that shows how profits vary with changes in volume. Property, Plant, and Equipment - Answer Exactly what the label implies: land, buildings, machinery, tools, furniture, fixtures, and vehicles used by a company in conducting its business activities. Public Company Accounting Oversight Board (PCAOB) - Answer Board of five full-time members established by the Sarbanes-Oxley Act to oversee the accounting and auditing profession. Recognition - Answer Boil down all the estimates and judgments into one number and report that one number in formal financial statements. Regression Line - Answer On a scattergraph, the straight line that most closely expresses the relationship between the variables. Relevance - Answer A qualitative characteristic in accounting. Relevance is associated with information that is timely, useful, has predictive value, and is going to make a difference to a decision maker. Relevant Range - Answer The range of operating level, or volume of activity, over which the relationship between total costs (variable plus fixed) and activity level is approximately linear. Reliability - Answer A qualitative characteristic in accounting. It is achieved when information is verifiable, objective (not subjective) and you can depend on it. Restructuring Charges - Answer The fact that companies have exercised considerable discretion in determining the amount and timing of a restructuring charge. Retained Earnings - Answer The cumulative amount of a corporation's profits that have been reinvested on behalf of the stockholders Return On Assets - Answer Net income divided by total assets and is the number of pennies of net income generated by each dollar of assets. Return On Equity - Answer The overall measure of the performance of a company. Return On Investment - Answer A measure of operating performance and efficiency in utilizing assets; computed in its simplest form by dividing net income by average total assets (also known as return on assets or ROA). Return On Sales - Answer Net income divided by sales and is interpreted as the number of pennies in profit generated from each dollar of sales. Return On Sales Revenue - Answer A measure of operating performance; computed by dividing net income by total sales revenue. Similar to profit margin. Revenue - Answer The value of the goods and services provided by a company in its business operations.