Spring Semester February 2026 WGU D196
Principles of Financial & Managerial Accounting
Objective Assessment (OA) Exam Prep | Financial
Statements, Managerial Accounting Methods, Cost
Behavior, Budgeting, Break-Even Analysis,
Contribution Margin, Cash Flow, Ratio Analysis &
Accounting Fundamentals Study Guide with
Practice Questions
,Question 1:
What is the primary purpose of financial accounting?
• A. To provide information for internal decision-making
• B. To prepare tax returns
• C. To offer financial information to external users
• D. To manage the company's cash flow
Correct Option: C. To offer financial information to external users
Rationale:
Financial accounting focuses on reporting an organization's financial performance and
position primarily to external parties such as investors, creditors, and regulatory
agencies. This information helps these stakeholders make informed decisions regarding
their engagement with the company.
Question 2:
Which financial statement represents a company's financial position at a specific point
in time?
• A. Income Statement
• B. Cash Flow Statement
• C. Statement of Retained Earnings
• D. Balance Sheet
Correct Option: D. Balance Sheet
Rationale:
The Balance Sheet provides a snapshot of a company’s assets, liabilities, and equity at
a specific date, indicating the financial position of the business. It helps stakeholders
understand what the company owns and owes at that moment.
Question 3:
In managerial accounting, what type of cost is directly attributable to the production of
a product?
• A. Fixed costs
• B. Variable costs
• C. Sunk costs
• D. Controllable costs
, Correct Option: B. Variable costs
Rationale:
Variable costs vary directly with the level of production, meaning they increase as more
products are manufactured. These costs are clearly tied to specific products and are
crucial for decision-making in managerial accounting, particularly in pricing and
budgeting.
Question 4:
Which of the following is considered a non-cash expense?
• A. Direct Labor
• B. Depreciation
• C. Cost of Goods Sold
• D. Advertising Expenses
Correct Option: B. Depreciation
Rationale:
Depreciation is a method of allocating the cost of a tangible asset over its useful life. It
represents a reduction in the value of the asset but does not involve an actual cash
outflow during the period when it is expensed, thus qualifying as a non-cash expense.
Question 5:
What is the primary purpose of budgeting in managerial accounting?
• A. To determine tax obligations
• B. To track actual performance against expected performance
• C. To decide on long-term investments
• D. To set prices for products
Correct Option: B. To track actual performance against expected performance
Rationale:
Budgeting enables businesses to plan for future financial activities and establish
benchmarks for performance evaluation. By comparing actual results to the budget,
management can assess operational effectiveness and make necessary adjustments to
strategies and operations.
Question 6:
What is the formula for calculating the gross profit margin?
• A. Gross Profit / Net Sales
Principles of Financial & Managerial Accounting
Objective Assessment (OA) Exam Prep | Financial
Statements, Managerial Accounting Methods, Cost
Behavior, Budgeting, Break-Even Analysis,
Contribution Margin, Cash Flow, Ratio Analysis &
Accounting Fundamentals Study Guide with
Practice Questions
,Question 1:
What is the primary purpose of financial accounting?
• A. To provide information for internal decision-making
• B. To prepare tax returns
• C. To offer financial information to external users
• D. To manage the company's cash flow
Correct Option: C. To offer financial information to external users
Rationale:
Financial accounting focuses on reporting an organization's financial performance and
position primarily to external parties such as investors, creditors, and regulatory
agencies. This information helps these stakeholders make informed decisions regarding
their engagement with the company.
Question 2:
Which financial statement represents a company's financial position at a specific point
in time?
• A. Income Statement
• B. Cash Flow Statement
• C. Statement of Retained Earnings
• D. Balance Sheet
Correct Option: D. Balance Sheet
Rationale:
The Balance Sheet provides a snapshot of a company’s assets, liabilities, and equity at
a specific date, indicating the financial position of the business. It helps stakeholders
understand what the company owns and owes at that moment.
Question 3:
In managerial accounting, what type of cost is directly attributable to the production of
a product?
• A. Fixed costs
• B. Variable costs
• C. Sunk costs
• D. Controllable costs
, Correct Option: B. Variable costs
Rationale:
Variable costs vary directly with the level of production, meaning they increase as more
products are manufactured. These costs are clearly tied to specific products and are
crucial for decision-making in managerial accounting, particularly in pricing and
budgeting.
Question 4:
Which of the following is considered a non-cash expense?
• A. Direct Labor
• B. Depreciation
• C. Cost of Goods Sold
• D. Advertising Expenses
Correct Option: B. Depreciation
Rationale:
Depreciation is a method of allocating the cost of a tangible asset over its useful life. It
represents a reduction in the value of the asset but does not involve an actual cash
outflow during the period when it is expensed, thus qualifying as a non-cash expense.
Question 5:
What is the primary purpose of budgeting in managerial accounting?
• A. To determine tax obligations
• B. To track actual performance against expected performance
• C. To decide on long-term investments
• D. To set prices for products
Correct Option: B. To track actual performance against expected performance
Rationale:
Budgeting enables businesses to plan for future financial activities and establish
benchmarks for performance evaluation. By comparing actual results to the budget,
management can assess operational effectiveness and make necessary adjustments to
strategies and operations.
Question 6:
What is the formula for calculating the gross profit margin?
• A. Gross Profit / Net Sales
