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D196 Study Guide |Questions with 100% Correct Answers | Updated & Verified | 2024, Exams of Business Finance

DeVry University - IllinoisBusiness Finance

D196 Study Guide |Questions with 100% Correct Answers | Updated & Verified | 2024

Typology: Exams

2024/2025

Available from 02/28/2025

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D196 Study Guide |Questions with 100% Correct
Answers | Updated & Verified | 2024
What is the role and purpose of accounting? - ✔✔Accounting is used to accumulate, measure, and
communicate financial information about organizations. This information is used to make informed
decisions regarding resource usage and allocation.
Who uses accounting information and why? - ✔✔Managerial Accounting: Internal decision making
(managers, CEO's, supervisors, etc.)
Financial Accounting: External user benefit (stakeholders, investors, tax authorities, etc.)
What are important influences on Accounting? - ✔✔Development of GAAP by FASB in the U.S. and by
the IASB worldwide. International business considerations, ethical considerations.
What is the role of ethics in Accounting? - ✔✔Accountants are seen by the public as ensuring that
misrepresentation of financial information does not occur.
What is the PCAOB and what does it do? - ✔✔PCAOB is the Public Company Accounting Oversight
Board, and they oversee audits of public companies. Created by the SEC after passage of the Sarbanes
Oxley Act of 2002 to restore public confidence.
Explain the accounting cycle. - ✔✔1. Analyze transactions
2. Record effects of transactions
3. Summarize effects of transactions
3a. Post journal entries
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Download D196 Study Guide |Questions with 100% Correct Answers | Updated & Verified | 2024 and more Exams Business Finance in PDF only on Docsity!

D196 Study Guide |Questions with 100% Correct

Answers | Updated & Verified | 2024

What is the role and purpose of accounting? - ✔✔Accounting is used to accumulate, measure, and communicate financial information about organizations. This information is used to make informed decisions regarding resource usage and allocation. Who uses accounting information and why? - ✔✔Managerial Accounting: Internal decision making (managers, CEO's, supervisors, etc.) Financial Accounting: External user benefit (stakeholders, investors, tax authorities, etc.) What are important influences on Accounting? - ✔✔Development of GAAP by FASB in the U.S. and by the IASB worldwide. International business considerations, ethical considerations. What is the role of ethics in Accounting? - ✔✔Accountants are seen by the public as ensuring that misrepresentation of financial information does not occur. What is the PCAOB and what does it do? - ✔✔PCAOB is the Public Company Accounting Oversight Board, and they oversee audits of public companies. Created by the SEC after passage of the Sarbanes Oxley Act of 2002 to restore public confidence. Explain the accounting cycle. - ✔✔1. Analyze transactions

  1. Record effects of transactions
  2. Summarize effects of transactions 3a. Post journal entries

3b. Prepare trial balance

  1. Prepare financial reports 4a. Adjust journal entries 4b. Prepare financial statements 4 c. Close books What is the basic accounting equation? - ✔✔Assets (resources, cash, equipment) = Liabilities (method of financing req. repayment)

Owner's Equity (method of financing NOT req. repayment) What is the expanded accounting equation? - ✔✔Assets = Liabilities + Capital Stock + Revenues - Expenses - Dividends What are the four financial statements covered? - ✔✔1. The Balance Sheet

  1. The Income Statement
  2. The Statement of Retained Earnings
  3. The Statement of Cash Flows What is the purpose of the balance sheet? - ✔✔To report the financial position of an entity at any point in time.

Selling Buildings/Land Purchasing Buildings/Land

  1. Financing Borrowing Money Repaying Loans/Distributions to owners What are the four categories of notes included in financial statements? - ✔✔1. Summary of significant accounting policies
  2. Additional info re: summary totals found in statements
  3. Disclosure of info not recognized in statements
  4. Supplemental info required by FASB or SEC What are common-size financial statements? - ✔✔Common-size statements display items as a percentage of a common base figure. How are common-size financial statements used? - ✔✔These statements are commonly used for easy analysis between different companies or of the same company period to period. What is horizontal analysis and what information does it provide? - ✔✔H. A. compares a firms results from year to year. It is used to note general trends or one-time events that may require further investigation. What is vertical analysis and what information does it provide? - ✔✔V. A. compares companies in the same industry at the same point in time.

What is the cash budgeting process? - ✔✔To use past patterns of cash collection and cash disbursement to create a forecast for expected future cash inflows and outflows. Why is cash budgeting important to an entity? - ✔✔Org is able to determine if it will have excess cash for new initiatives or need to borrow additional cash to meet expense demands for the upcoming periods. ENTER CASH BUDGETING WORD PROBLEM HERE - ✔✔ What is a master budget and why do we prepare one? - ✔✔Master budget = blueprint for the upcoming periods' operations. Serves as a framework for changes in plans if the periods' events don't go as planned. What is the master budgeting process for a manufacturing firm? - ✔✔1. All budgets begins with the sales budget or sales forecast.

  1. Based on sales budget, a production budget is created (after deciding the level of finished goods inventory and factoring in how much beginning inventory is on hand)
  2. Direct Materials, Direct Labor, and Manufacturing Overhead budget are created from the production budget.
  3. Those budgets are combined with the selling & admin expense budget (which represents a period rather than manufacturing costs) to determine the prelim. cash budget.
  4. Once inflows and outflows are known, a budgeted income statement and balance sheet (called pro- forma financial statements) are created.