Accounting Crash Course Exam Practice
Questions And Correct Answers
(Verified Answers) Plus Rationales 2026
Q&A | Instant Download Pdf
Based on core topics in Wall Street Prep’s Accounting Crash Course (financial
statements, principles, ratios, working capital, assets, liabilities, equity, cash
flows, and analysis).
1. What is the primary objective of financial accounting?
A. Minimize taxes
B. Provide useful financial information to external users
C. Forecast future sales
D. Manage internal budgets
Rationale: Financial accounting focuses on reporting financial
information to external stakeholders like investors and creditors.
2. Which principle dictates that expenses be recognized in the period
they help generate revenues?
, A. Revenue Recognition
B. Matching Principle
C. Historical Cost
D. Materiality
Rationale: The matching principle aligns expenses with related
revenues.
3. Under accrual accounting, revenues are recorded when:
A. Cash is received
B. Earned and measurable
C. Services are billed
D. Customers agree verbally
Rationale: Accrual accounting recognizes revenues when earned, not
necessarily when cash is received.
4. The accounting equation is:
A. Assets + Liabilities = Equity
B. Assets = Liabilities + Equity
C. Revenue – Expenses = Net Income
D. Cash Inflows – Cash Outflows = Change in Cash
Rationale: The fundamental balance sheet formula ensures balance
sheet balances.
5. Which financial statement shows a company’s profitability over a
period?
A. Balance Sheet
, B. Statement of Equity
C. Income Statement
D. Statement of Retained Earnings
Rationale: The income statement reports revenues and expenses for a
period.
6. Cash received from customers is reported on the:
A. Balance Sheet
B. Statement of Cash Flows
C. Income Statement
D. Statement of Equity
Rationale: The cash flow statement tracks cash movements.
7. Which of the following is a current asset?
A. Bonds Payable
B. Accounts Receivable
C. Equipment
D. Goodwill
Rationale: Accounts receivable is expected to convert to cash within
one year.
8. Depreciation is:
A. Cash expense
B. Allocation of cost over useful life
C. Gross profit
Questions And Correct Answers
(Verified Answers) Plus Rationales 2026
Q&A | Instant Download Pdf
Based on core topics in Wall Street Prep’s Accounting Crash Course (financial
statements, principles, ratios, working capital, assets, liabilities, equity, cash
flows, and analysis).
1. What is the primary objective of financial accounting?
A. Minimize taxes
B. Provide useful financial information to external users
C. Forecast future sales
D. Manage internal budgets
Rationale: Financial accounting focuses on reporting financial
information to external stakeholders like investors and creditors.
2. Which principle dictates that expenses be recognized in the period
they help generate revenues?
, A. Revenue Recognition
B. Matching Principle
C. Historical Cost
D. Materiality
Rationale: The matching principle aligns expenses with related
revenues.
3. Under accrual accounting, revenues are recorded when:
A. Cash is received
B. Earned and measurable
C. Services are billed
D. Customers agree verbally
Rationale: Accrual accounting recognizes revenues when earned, not
necessarily when cash is received.
4. The accounting equation is:
A. Assets + Liabilities = Equity
B. Assets = Liabilities + Equity
C. Revenue – Expenses = Net Income
D. Cash Inflows – Cash Outflows = Change in Cash
Rationale: The fundamental balance sheet formula ensures balance
sheet balances.
5. Which financial statement shows a company’s profitability over a
period?
A. Balance Sheet
, B. Statement of Equity
C. Income Statement
D. Statement of Retained Earnings
Rationale: The income statement reports revenues and expenses for a
period.
6. Cash received from customers is reported on the:
A. Balance Sheet
B. Statement of Cash Flows
C. Income Statement
D. Statement of Equity
Rationale: The cash flow statement tracks cash movements.
7. Which of the following is a current asset?
A. Bonds Payable
B. Accounts Receivable
C. Equipment
D. Goodwill
Rationale: Accounts receivable is expected to convert to cash within
one year.
8. Depreciation is:
A. Cash expense
B. Allocation of cost over useful life
C. Gross profit
