D196 WGU, Exam Questions and answer, graded A+ 2023 update

D196 WGU, Exam Questions and answer, graded A+ 2023 update What is the role and purpose of accounting ? - ✔✔-Role: To help track income and expenditures, and to provide investors, management, and government with fin ...

D196 WGU, Exam Questions and answer, graded A+ 2023 update What is the role and purpose of accounting ? - ✔✔-Role: To help track income and expenditures, and to provide investors, management, and government with financial information. Purpose: To accumulate, measure, and communicate financial information about businesses and other organizations. · Who uses accounting information and why? - ✔✔-Potential investors and creditors use accounting information, but basically everyone uses accounting information. They use it to make internal and external business decisions. · What are the important influences on accounting? - ✔✔-Important influences on accounting is the development of the "generally accepted accounting principles"(GAAP), international business and ethical consideration. · What is the role of ethics in accounting? - ✔✔-Being an accountant requires honesty and integrity, as well as professional judgement. So having ethics in accounting is very important. What are the three main functions of accounting? - ✔✔-The 3 main functions of accounting are: Analyzing, Bookkeeping, and Evaluating(ABE). The Financial Accounting Standards Board(FASB) - ✔✔-An organization responsible for studying accounting issues and establishing standards a) Private group b) Public process c) Establishes GAAP The Governmental Accounting Standards Board(GASB) - ✔✔-A private, non governmental organization who sets accounting and financial reporting standards for state and local governments Securities and Exchange Commission(SEC) - ✔✔-Regulates stock exchanges a) Has legal authority to regulate financial markets and accounting b) Usually defers to the FASB on accounting matters The Public Company Accounting Oversight Board(PCAOB) - ✔✔-Oversees all accounting firms. Internal Revenue Service(IRS) - ✔✔-Collects and regulates income taxes International Accounting Standards Board(IASB) - ✔✔-The FASB of the world(except the USA) Assets - ✔✔-assets are what we OWN. Common Assets: -) Cash -) Accounts receivable -) Inventory -) Buildings -) Prepaid Liabilities - ✔✔-An obligation to pay cash, transfer other assets, or provide services to someone. A) Liabilities are what we OWE. B) Common Liabilities: -) Accounts Payable -) Taxes Payable -) Mortgage Payable -) Unearned Revenue Owners Equity - ✔✔-The owners share of earnings. A) Sources of equity: -) Capital/Common Stock -) Retained Earnings What is the Accounting Cycle and how does it work? - ✔✔-The accounting cycle is the procedure for analyzing, recording, summarizing, and preparing the transactions of a business. The accounting cycle works by turning transactions into financial statements through these steps: Step 1: Analyze Transactions Step 2: Record the effects of transactions Step 3: Summarize the effects Step 4: Prepare reports · What is the Accounting Equation? - ✔✔-Assets=Liability+Equity(ALE) Can you explain the 'expanded' accounting equation? - ✔✔-Assets=Liabilities+(Capital Stock+Cumulative Net Income-Cumulative Dividends) What are the four financial statements covered in this module? - ✔✔-Balance Sheet, Income Statement, Statement of Cash Flows, Statement of Retained Earnings Can you define and explain the purpose of the Balance Sheet and its components? - ✔✔-A balance sheet is the statement of the company's financial position at a certain period, and records the company's assets, liabilities, and owners' equity. The purpose of a balance sheet is to report the resources of a company, the company's obligations, and the owners' equity. The components of a balance sheet are: Assets, Liabilities, and Owner's equity. -) The balance sheet equation: Assets=Liabilities+Equity(ALE). -) Classified Balance Sheet: A balance sheet that distinguishes between current and long-term assets. Can you define and explain the purpose of the Income Statement and the components that it contains? - ✔✔-An income statement is the statement of earnings, and records the amount of revenue(profits) generated, and costs incurred(expenses) by a company during a period of time(a month, a quarter, a year). The purpose of an income statement is to assess a company's profitability by looking at the company's profits, and expenses. The income statement also summarizes the company's operations at a certain period. The components of an income statement are: revenues, expenses, and net income. Can you define and explain the purpose of the Statement of Retained Earnings and the components that it contains? - ✔✔-A statement of retained earnings identifies the changes in accumulated investments made by owners, and the losses/profits of a business since day one. The purpose of a statement of retained earnings is to identify changes in investments made by owners from the beginning of the statement to the end. The components of a statement of retained earnings are: Retained Earnings from the previous period, Net Income, and Dividends. Can you define and explain the purpose of the Statement of Cash Flows and the components that it contains? - ✔✔-A statement of cash flows reports the amount of cash collected and cash paid out by a company in operating, investing, and financing operations during a period of time. The purpose of a statement of cash flows is to provide information of cash inflows(receipts) and cash outflows(payments).The components of a statement of cash flows are: -) Operating activities: Which are normal business activities a) Examples of operating activities: Paying employees, paying rent, and collecting cash from customers. -) Investing activities: Associated with buying and selling long-term assets a) Examples of investing activities: Buying/selling land, Buying/selling equipment, etc. -) Financing activities: The activities in which cash is collected from or repaid to investors and creditors. a) Examples of financing activities: Borrowing money, repaying loans, and paying dividends Can you explain the importance of Notes to the Financial Statements and what is included in these notes? - ✔✔-The importance of Notes to the Financial Statements is that they give the information that is important, but not listed in the other statements, giving additional information we'd like to know. The notes of financial statements include a summary of Significant accounting policies, Additional information about the summary totals, Disclosure of information NOT recognized in the financial statements, and Any additional information Revenue - ✔✔-The amount of assets created through the sale of goods and services. Revenue is an INCREASE in a company's net assets because of what the company does. Expenses - ✔✔-The amount of assets consumed through business operations; The costs incurred in normal business operations to generate revenue. Expenses are a DECREASE in a company's net assets because of what a company does. Net income equation - ✔✔-Revenues - Expenses = Net Income · What are common-size financial statements and how are they used? - ✔✔-Common-Size Financial Statements are included in most of the main statements and reduces figures to be more easily understood(such as reducing numbers to percentages). Horizontal and Vertical analysis is used to analyze a company's performance over a certain period of time. What is horizontal analysis and what information does it provide? - ✔✔-Horizontal analysis is a method of analysis that compares a firm's results from year to year by comparing percentages of the company. It provides information on what is driving a company's financial performance and will note trends of a company's financial performance. This is mainly used by investors. What is vertical analysis and what information does it provide? - ✔✔-Vertical analysis is used to compare percentages at the same point in time across companies in the same industry. It provides information on how a company's financial value or financial gain/loss compares to another similar company. Equations for vertical and horizontal analysis charts: - ✔✔-Year to year change: =(Account CurrentAccount Previous)/Account Previous OR =(Year 2-Year 1)/Year 1. Percentage of Sales - ✔✔-Income Statement amount/Sales Example: =F4/$F$4 Gross Profit - ✔✔-Sales-Cost of Goods Sold Tax Calculation - ✔✔-Earnings before Taxes X Tax Rate Can you describe the cash budgeting process and why it is important to any organization? - ✔✔-The cash budgeting process is a schedule of charting your expected cash inflows and cash outflows during a certain period. It is important for an organization because it gives the company a knowledge and expectation of where their money is going and how to handle their money, as well as noticing times of cash shortages and cash surpluses. Can you identify and explain what cash receipts(cash inflows) are? - ✔✔-A cash receipt is taking account and acknowledging the cash transactions being received by the company. What is an Aging Schedule? - ✔✔-An aging schedule is an analysis of past cash flow patterns to reveal the expected timing of future cash collections Can you use the Excel charting abilities to show the effects to 'manage' cash receipts and cash disbursements? Steps to creating a Cash flow Chart: - ✔✔-1) Click on "Insert" 2) Choose a chart 3) Select a data range in "Chart Design" 4) Input data 5) Edit horizontal axis labels 6) Remove the legend, and add a title 7) Add data labels, by going to chart design(1), add chart elements(2), add data labels(3). What exactly is a budget and why do we prepare these? - ✔✔-A budget is a quantitative expression of a plan that shows how a firm or organization will acquire and use resources. We prepare a budget so we can plan how we spend or receive our money, so we don't go into debt or go over the budget. Explain what a master budget is and why it's important? - ✔✔-A master budget is a network of many separate schedules and budgets that together constitute the overall operating and financing plan for the upcoming period. A master budget is important because it is used to compare the budgeted performance to the actual performance. · Can you describe the master budgeting process for a manufacturing firm? - ✔✔-The master budgeting process for a manufacturing firm is broken down into quarterly sales based off how many items were sold. Sales Budget - ✔✔-A sales budget is a schedule of projected sales over the budget period, which often includes a measure of revenue earned and cash collected from its customers. Production Budget - ✔✔-A production budget is a schedule of production requirements for the budget period. Direct Materials Budget - ✔✔-A direct materials budget is a schedule of direct materials to be used and purchased during the budget period. Direct Labor Budget - ✔✔-A direct labor budget is a schedule of direct labor requirements for the budget period Manufacturing Overhead Budget - ✔✔-A manufacturing overhead budget is a schedule of production costs other than those for direct labor and direct materials. This includes both fixed and variable manufacturing overhead costs. Selling and Administrative Budget - ✔✔-A selling and administrative budget is a schedule of all nonproduction spending expected to occur during the budget period. Examples: Cost of office supplies, salaries of sales managers, and the depreciation of administrative office buildings. · What are organizational segments? - ✔✔-Organizational segments are parts of an organization that require a separate report for evaluation by management. What is responsibility accounting and how does it impact an organization? - ✔✔-Responsibility accounting is a system of evaluating a performance in which managers are held accountable for the costs, revenues, assets, or other elements in which they have control over. Responsibility accounting impacts an organization because it gives complete accountability of cost loss and cost profit to the manage