Accounting for decision makers, Exams of Accounting

Download Accounting for decision makers and more Exams Accounting in PDF only on Docsity! A+ TEST BANK Accounting for decision makers C213 WGU-with 100% verified solutions 2023-2024 TESTED AND EDITED Accounting for decision makers C213 WGU-with 100% verified solutions 2023-2024 Accounting steps. 1. Prepare 2. Analyze 3. Gather 4. Make decisions 5. Implement 6. Observe. Managerial info is inside or outside the business? Inside, Internal True or false, managerial accounting uses BOTH managerial and financial accounting? True. Financial accounting is only outside. Managerial accounting can be inside AND outside. Financial is inside or outside the business? Outside, External, includes lenders and investors The financial statement includes what 3 documents Balance sheet, income statement, and statement of cash flows Point in time, Assets (resources) and liabilities (obligations) Balance Sheet Period of time (usually 1 year), amount of profit made Income Statement Period of time, where money came from, and where it went. Inflow and outflow of cash (Cash Flows). Change in money for the period. Statement of Cash flows Only CPA's: Certified public accountants. The Sarbanes-Oxley Act "SOX" created? PCAOB: Public company accounting oversight board. PCAOB is under supervision of? Under supervision of the SEC. Who appoints members, approves actions, gov standards, inspections, and investigations? It is a private group and OVERSEES. AUDITORS? PCAOB: Public Company Accounting OVERSIGHT Board. IRS U.S. Gov agency that collects and regulates income taxes. Their primary goal is to collect revenue. There are two sets of books. Tax Books and Financial accounting books. Economic income and accounting income books. & Tax income, and cash flow books. IASB: Internatonal Accounting Standard Board Similar to the FASB, but not 100% the same. It is international, everywhere but the U.S. Barriers to international convergence are? Who enforces and national policies. Rules set centrally, but legally adopted and enforced locally? Condorsement To increase government regulation, one would use: The SEC, SOX, and PCAOB. Financial statements Reduce uncertainty and allows lenders and investors to target their financing and investing to the level of risk they are willing to take. A financial statement that furthermore decreases uncertainty. Audit Provides accountants the best attempt at measuring the economic performance of a company. Income Statement Mother of all financial statements. Balance sheet Assets=liabilities+equity Accounting equation Resources owned or controlled by a company that will provide probable future economic benefit. Assets (resources) Obligations that require the probable future sacrifice of economic benefits in the form of the transfer of assets or the providing of services. Liabilities (obligations) Investment amount in the business PLUS how much profit they have left in the business. L-A=E Equity Owners Equity 1 paid in capital, 2 retained earnings, 3 treasure stock, 4 accumulated other comprehensive income. The amount originally paid in exchange for share of stock PIC: Paid in capital CUMMULATIVE earnings that have been retained in the business Retained earnings Company buys back its own shares of stock, shown as a subtraction from equity. Treasury stock MARKET EVENTS that result in an increase or decrease in equity are: Things that a business does every day hundreds of times Operating activities NOT investing in stock or bonds. It is investing in the productive capacity of the business. Time to time things, not usually daily, Ex: buying, selling long term assets such as buildings, equipment, land. Investing activities Obtaining the capital or financing that a business requires to buy needed resources. Time to time things, not every day. Ex: Borrowing, repaying, receiving cash invested by shareholders, and paying dividends. Financing activities Notes to the financial statement: Summary of significant accounting policies, additional info about summary totals, disclosure of info not recognized, and supplementary info. The external audit is enforced by what? The SEC Public companies by law have to do what kind of audit? External. But, private companies who want to provide assurance to a banker or new investor may do an external audit too. To become an external auditor you have to? Become a CPA (certified public accountant), CE, CPA exam, and be completely INDEPENDENT to any company you audit. An audit certifies what two things? General accepted accounting principles (GAAP), and General accured auditory standards (GAAS). Certifies that the companies information is not misleading. Does an audit ensure that a company is a good investment for a possible investor? NO. An audit does NOT certify that a company is good or not good to invest in. It does certify that a company is following GAAP, and GAAS. Relevance Vs. Reliability Relevance: FAST, but not precise/certain. Reliability: Can count on it. Slow, carefully verified, precise, historically in the past, this was used most often. Across time for the same company and across company at same point. Subcategory is consistency. Comparability Telling bad news immediately, wait on good news till you are positive about it. Lenders encourage this. Conservatism size of the thing that makes a difference and could impact decisions. Important to auditors. If an item is material, it equals or exceeds 2% of the sales, or 5% of owners equity, or 10% of net income. Materiality Does materiality replace accounting judgment? Never Details. All three financial statements are not isolated but rather an integrated set of reports on a companies financial status. Articulation What contains detailed explanation of why the balance sheet cash amount changed form beginning to end of the year? Statement of cash flows. This explains the change of retained earnings shown on the balance sheet. Income statement, combined with amount of dividends declared during the year. cash from operations on the statement of cash flows is transformed into net income through? The accounting adjustments applied to the raw cash flow date. Analysis of financial statement of numbers can be used to do what? Diagnose existing problems and to foreceast how a company will perform it he future. This ratio is the relationships between two financial statement numbers and is often used in analyzing and describing a companies performance Financial ratios This allows comparison of financial statements across years and between companies. They are prepared by dividing all financial staement numbers by the sales for the year. Common size financial statement (subcategory of financial ratios) Decomposes return on equity into profitability, efficiency, and leverage components. The Dupont Framework