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WGU c213 study guide Questions and Answers 100% Pass purpose of accounting - ANSWER -Accounting 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. Bookkeeping is a p...

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  • December 17, 2024
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WGU c213 study guide Questions and
Answers 100% Pass

purpose of accounting - ANSWER ✔✔-Accounting 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.


Bookkeeping is a part of accounting. Bookkeeping refers to the process of recording transactions into

various accounts, which is the first step in accounting. The next step is to analyze the accounts and

organize them into financial statements and other useful reports. (Reference topic 1.1)


The balance sheet - ANSWER ✔✔-reports a company's assets, liabilities, and owners' equity. It reports the

financial position of a firm at a point in time.


income statement - ANSWER ✔✔-reports the amount of net income earned by a company during a

period. Net income is the excess of a company's revenues over its expenses. It reports the financial

performance of a firm over a period of time.


statement of cash flows - ANSWER ✔✔-reports the amount of cash collected and paid out by a company

in the following three types of activities: operating, investing, and financing over a period of time.

(Reference topic 1.2)


Fin Statement Users: Lenders - ANSWER ✔✔-Banks use companies' financial statements in making

decisions about commercial loans. The financial statements are useful because they help the lender

predict the future ability of the borrower to repay the loan.




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Fin Statement Users: Investors - ANSWER ✔✔-Investors want information to help them estimate how

much cash they can expect to directly receive from the business in the future if they invest in it now.


Fin Statement Users: Company Management - ANSWER ✔✔-Managers use financial accounting data to

formulate company goals, to compute bonuses for employees, and to illuminate company weaknesses.


Fin Statement Users: Suppliers and Customers - ANSWER ✔✔-Suppliers, customers, and employees use

financial statements to tell them about the long-run prospects of a company.


Fin Statement Users: Employees - ANSWER ✔✔-Financial statement data, as mentioned earlier, are used

in determining employee bonuses. In addition, financial accounting information can help an employee

evaluate the employer's ability to fulfill its long-run promises, such as for pensions and retiree health care

benefits. Financial statements are also important in contract negotiations between labor and management.


Fin Statement Users: Competitors - ANSWER ✔✔-Competitors use financial accounting information to

reveal strategic opportunities within their industry.


Government Agencies - ANSWER ✔✔-Government agencies use financial statement data to bolster

political and regulatory positions for and against companies.


Fin Statement Users: The Press - ANSWER ✔✔-Reporters use financial accounting data as background

information and to indicate which companies are undergoing significant changes in financial status.

(Reference Topic 1.3)


Fin Statement Users: Politicians - ANSWER ✔✔-Politicians use financial statement data to bolster political

and regulatory positions for and against companies.


Acct Rules: Financial Accountings Standards Board (FASB) - ANSWER ✔✔-sets accounting rules for the

private section in the U.S.. It is a private, non-profit body established and supported by the joint efforts of

the U.S. business community, financial analysts, and practicing accountants.




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The FASB has no legal power to enforce the accounting standards it sets but maintains its influence by

carefully protecting its prestige and reputation. The standards it sets are called Generally Accepted

Accounting Standards (GAAP). These are a common set of accounting principles, standards, and

procedures that companies must follow when they compile their financial statements. (Reference Topic

1.4)


Acct Rules: Securities and Exchange Commission (SEC) - ANSWER ✔✔-has the legal authority to set

accounting rules, but has deferred that responsibility to the FASB in most cases. The SEC 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 who sell stocks to the general public are hiding or manipulating

financial data. (Reference topic 1.5)


Acct Org: CPA Accreditation - ANSWER ✔✔-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 and executes the

vast majority of external audits in the US.


The AICPA sets ethical standards for CPAs, provides continuing education for them, writes and grades

the CPA exam, lobbies for legislation favored by CPAs, and provides other support to CPAs. Its oversight

of the CPA exam is its main role in accreditation. However, to be accredited as a CPA you must meet the

requirements of the state in which you plan to practice. The requirements for each state are set by that

state's legislature and overseen by that state's Board of Accountancy, which is a state agency. (Reference

Topic 1.5)


Acct Org: Public Company Accounting Oversight Board (PCAOB) - ANSWER ✔✔-determines who can

audit public companies regardless of whether the audit firm is accredited by a state Board of

Accountancy. Thus, they accredit firms that can audit public companies.


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