WGU D196 PRINCIPALS OF MANAGERIAL AND FINANCIAL ACCOUNTING
STUDY GUIDE
MODULE 1: ACCOUNTING INFORMATION
1.What is the role and purpose of accounting?Accumulate and report on financial information about performance, financial position, and cash flow of a business. Used to reach decisions about how to manage the business, invest in it, or lend money to it.
2.Who uses accounting information and why?
Businesses use accounting to: analyze transactions, handle routine
bookkeeping tasks, and structure information so it can be used to evaluate the performance and health of the business. Used by creditors, investors,
and both decisions makers inside and outside of organizations use it to:
allocate resources, evaluate performance, and determine a company’s profitability.
3.What are the important influences on accounting?Three particularly important factors that influence the environment in which accounting operates are the development of “generally accepted accounting principles” (GAAP), international business, and ethical considerations.
4.What is the role of ethics in accounting?Maintaining high ethical standards is important in accounting because accounting decisions often impact real-world economic decisions.Accountants have a moral and economic incentive to be ethical and to conduct themselves ethically. Accountants are the scorekeepers, so they must remain unbiased. 1 / 4
NOTES
Managerial Accounting: is internal decision making such as product costs,
break even analysis, budgeting, performance evaluation, and outsource production.
Financial Accounting: is external decision making such as investors and
creditors. Credit analysis estimate the value of the company.
Balance Sheet: reports the resources of a company (assets), the company’s
obligations (liabilities), and the owner’s equity, which represents the difference between what is owned (assets) and what is owed (liabilities). 2 / 4
Income Statement: reports the amount of net income earned by a company
during a period. REVENUE – EXPENSES = NET INCOME Statement of Cash Flows: reports the amount of cash collected and paid out by
a company in the following three types of activities: operating, investing, and
financing.Financial Accounting Standards Board (FASB): a non-government with no legal authority agency in the U.S. that sets the accounting standards for publicly listed companies.Generally Accepted Accounting Principles (GAAP): rules governing financial accounting. In the U.S., GAAP is set by a private, non-governmental group called FASB and Worldwide GAAP is set by the International Accounting Standards Board (IASB) which is based in London.
Governmental Accounting Standards Board (GASB): sets the accounting
and financial reporting standards for state and local governments following GAAP.It is a private, non-governmental organization that seeks to improve accounting practices and procedures.
International Accounting Standards Board (IASB): was formed in 1973 to
develop international accounting standards to attempt to harmonize conflicting national standards.
MODULE 2: ACCOUNTING CYCLE
5.What is the Accounting Cycle?
The four steps of the accounting cycle are:
1.Analyze Transactions 2.Record the effects of the transactions 3.Summarize the effects of transactions 4.Prepare reports 3 / 4
The purpose of the accounting cycle is to help you see how the accounting process eventually turn from transactions to financial statements, thereby making financial data into useful information for decision-making by managers.
6.What is the Accounting Equation?
ASSETS = LIABILITIES + EQUITY
Think ALE
Expanded Accounting Equation:
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