WGU MBA C213 Accounting Flashcards

Questions and Answers

What is accounting?

Recording of 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.

What are the three primary financial statements in financial accounting?

The Balance Sheet, The Income Statement, The Statement of Cash Flows.

What is a Balance Sheet?

A financial statement that reports assets, liabilities, and owner's equity on a specific date.

What is an Income Statement?

A financial statement showing the revenue and expenses for a fiscal period. Signup and view all the answers

What is the Statement of Cash Flows?

The amount of cash collected and paid out by a company in operating, investing, and financing activities. Signup and view all the answers

Who are the users of financial accounting?

Lenders, investors, company management, suppliers, customers, employees, competitors, government agencies, politicians, and the press. Signup and view all the answers

What does FASB stand for?

Financial Accounting Standards Board. Signup and view all the answers

What does SEC stand for?

Securities and Exchange Commission. Signup and view all the answers

What is AICPA?

American Institute of Certified Public Accountants. Signup and view all the answers

What are the three factors that make right now a time of significant change in accounting?

Globalization of Accounting Standards, Information Technology, Accounting scandals including the 2001 Sarbanes-Oxley Act. Signup and view all the answers

What is the purpose of financial statements?

To increase the amount of financial information about a company to attract investors, lenders, and other interested parties. Signup and view all the answers

What is included in a Balance Sheet?

The company's financial position at a specified point in time, listing resources (assets), obligations (liabilities), and net ownership interest (owner's equity). Signup and view all the answers

What do Notes to the Financial Statements provide?

Information on accounting assumptions and supplemental information not included in the statements. Signup and view all the answers

What is an External Audit Report?

An audit performed by accountants from outside a company that increases the reliability of the information in the financial statements. Signup and view all the answers

What does relevant information mean?

Information that is provided on a timely basis that can be used to assess the past and project the future. Signup and view all the answers

What does reliable information represent?

Information that represents exactly what it is supposed to represent. Signup and view all the answers

What is comparability in accounting?

The ability to compare the accounting information of different companies because they use the same accounting principles. Signup and view all the answers

What is conservatism in accounting?

The practice of recognizing all losses but not recognizing gains until they are certain. Signup and view all the answers

What is materiality in accounting?

The concept that weighs whether or not a certain dollar amount is large enough to make a difference to anyone. Signup and view all the answers

What are current assets?

Cash and other assets expected to be exchanged for cash or consumed within a year. Signup and view all the answers

What are the most common current assets?

Cash, accounts receivable, inventory. Signup and view all the answers

What are long-term assets?

Assets that are expected to be used in business operations for longer than one year. Signup and view all the answers

What are the most common long-term assets?

Property, plant, and equipment. Signup and view all the answers

What are intangible assets?

Companies report the intangibles that they have purchased from other companies but not the intangibles that they have developed themselves. Signup and view all the answers

What is the first item in a U.S. balance sheet?

Usually cash; companies located in non-U.S. countries often list long-term assets first. Signup and view all the answers

How long do companies usually provide balance sheets for?

For at least two years, with the statements shown in comparative, side-by-side format. Signup and view all the answers

What is recognition in accounting?

The process of condensing all estimates and judgments into one number and reporting that one number in the formal financial statements. Signup and view all the answers

What is the accounting equation?

Assets = Liabilities + Owner's Equity. Signup and view all the answers

Study Notes

Accounting Fundamentals

Accounting involves recording daily financial transactions and organizing this data into reports for evaluating a company's financial health.
The three primary financial statements are the Balance Sheet, Income Statement, and Statement of Cash Flows.

Financial Statements Breakdown

Balance Sheet: Displays a company’s assets, liabilities, and owner's equity at a specific date.
Income Statement: Summarizes revenue and expenses over a fiscal period, calculating net income by subtracting expenses from revenues.
Statement of Cash Flows: Documents cash inflows and outflows categorized into operating, investing, and financing activities.

Users of Financial Accounting

Key users include lenders, investors, management, suppliers, customers, employees, competitors, government entities, and media.

Regulatory Bodies and Standards

FASB (Financial Accounting Standards Board): Establishes accounting standards in the United States.
SEC (Securities and Exchange Commission): Oversees and regulates U.S. stock exchanges.
AICPA (American Institute of Certified Public Accountants): A professional organization for certified public accountants in the U.S.

Contemporary Changes in Accounting

Significant changes stem from globalization of accounting standards, advancements in information technology, and reactions to accounting scandals alongside legislation like the Sarbanes-Oxley Act of 2001.

Importance of Financial Statements

Financial statements enhance available financial information, aiding in attracting stakeholders like investors and lenders.

Components of the Balance Sheet

Reflects financial position detailing assets, liabilities, and owner's equity at a point in time, typically starting with cash in U.S. formats.
Companies often present balance sheets for at least two years in a comparative format.

Additional Financial Concepts

Notes to the Financial Statements: Offer crucial insights into accounting assumptions and additional information beyond standard statements.
External Audit Report: Conducted by independent accountants to enhance the credibility of financial statements.

Key Terminology

Relevant Information: Timely data aiding in past assessments and future projections.
Reliable Information: Accurately reflects what it represents.
Comparability: Ensures that accounting information can be compared across different companies.
Conservatism: In accounting, it means recognizing losses promptly while deferring recognition of gains until confirmed.
Materiality: Evaluates whether a certain dollar amount impacts financial decisions.

Asset Classifications

Current Assets: Include cash and resources expected to be converted to cash or consumed within one year (e.g., cash, accounts receivable, inventory).
Long-term Assets: Used for business operations for more than one year, commonly including property, plant, and equipment.
Intangible Assets: Purchasable intangibles are reported, but self-developed intangibles are generally not.

Recognition in Accounting

Recognition condenses estimates into a singular figure reported in financial statements.
The accounting equation is expressed as Assets = Liabilities + Owner's Equity, foundational for understanding the balance sheet.

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Description

This quiz features flashcards focused on key accounting concepts relevant to the WGU MBA C213 course. Test your knowledge on essential financial statements, the definition of accounting, and other important terms. Perfect for reinforcing your understanding of accounting principles.