D196 PRINCIPLES OF FINANCIAL AND MANAGERIAL ACCOUNTINGWGU

TUTORIAL WORK

D196 PRINCIPLES OF FINANCIAL AND MANAGERIAL ACCOUNTING(WGU)

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D196 Principles of Financial and Managerial Accounting The graduate identifies the role of accounting information and the purpose of the accounting cycle in decision-making

Module 1 Lesson 1: Describe the purpose and users of accounting information

Accounting a system used for providing “quantitative information (financial) about economic entities intended to be useful in making economic decisions

- Quantitative: numbers

- Financial: money

- Useful: accounting only exists because it is useful

• Decisions: past information can still be useful and can impact decisions about the future

Accounting involves 3 basic functions

• Analysis (determining if information should be tracked by the accounting system)
• Bookkeeping (day to day keeping track of transactions)
• Evaluation (obtaining and using financial information to determine the health and performance

of a business) Decision-Making Process

- Step 1: Identify the issue

- Step 2: Gather information

- Step 3: Identify Alternatives

• Step 4: Select the option that will most likely result in the desired objective

Capital comes from three sources:

• Investors (owners)
• Creditors (lenders), and
• The business in the form of earnings

Accountants play two roles:

• Measuring and reporting: measure and report the results of business activities. Accountants

follow the standard set of procedures referred to as the accounting cycle.

• Financial Accounting Cycle ASRP

▪ Analyze transactions ▪ Record effects of transactions 2 / 4

▪ Summarise effects of transactions ▪ Prepare reports – so that we have numbers that we can evaluate

• Advising: advise managers on how to achieve business goals such as generating profit,

minimizing costs, providing efficient services

Module 1 Lesson 2: Identify users of accounting information

Accounting System Output The two primary areas of accounting are Managerial Accounting & Financial Accounting:

• Managerial Accounting (internal)
• Product costs
• Breakeven analysis
• Budgeting
• Performance evaluation
• Outsource production
• Financial Accounting (external)
• Credit analysis
• Regulatory uses (such as financial health of bank and insurance companies) 3 / 4

3 General-Purpose Financial Statements – for people OUTSIDE the business:

• Balance Sheet – list as of a point in time (a second)
• Reports the resources of a company (the assets)
• The company’s obligations (the liabilities)
• The owners’ equity
• Income statement – for a period of time (week/month/year); reports the amount of net income

earned

• Statement of cash flows – for a period of time (week/month/year); reports the amount of cash

collected and paid out

• Operating
• Investing
• Financing

External Stakeholders – Key External Users of Financial Accounting Data Lenders (creditors)

• Being repaid, with interest
• Use companies’ financial statements in

making decisions about commercial loans

• Predict the ability of the borrower to repay

the loan Investors

• How much cash they can expect to

receive in the future if they invest in a business now

• Aid investors in assessing future cash

flows Competitors

• Identify strategic opportunities for

marketing efforts where potential profits are high or where your competitor is weak Federal, State, and Local Government Agencies

• Make sure that investors have sufficient

information to make informed investment decisions

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