WGU D196 Exam Q&A – 162 Pre-Assessment Questions &
Verified Answers | Principles of Financial & Managerial
Accounting | 2026 Update
1. If a company has $20,000 in assets and pays $5,000 in advertising costs, what
will be the new total for assets and how will it affect the company's net
income?
Assets will total $15,000 and net income will decrease due to
increased expenses.
Assets will total $25,000 and net income will remain unchanged.
Assets will total $20,000 and net income will increase due to
decreased expenses.
Assets will total $15,000 and net income will increase due to increased
revenues.
2. Interpret how high credit sales can lead to a negative net cash position in a
month with high total sales.
High credit sales mean that cash has not yet been received, leading
to a negative net cash position despite high sales figures.
High credit sales do not impact cash flow in the same month.
High credit sales indicate that expenses are also high, which affects
net cash.
High credit sales suggest that the company is not selling enough
products.
3. What are the three main components of the accounting equation?
Liabilities, Equity, and Cash
Expenses, Dividends, and Liabilities
, Assets, Liabilities, and Equity
Revenue, Expenses, and Assets
4. Which of the following best describes accounts payable
The amount of cash owed to a company by its customers from the
sale of goods or services on account
The amount of cash not expected to be collected by a company from
its customers from the sale of goods or services on account (bad
debts)
Amount of cash collected by a company from its customers from the
sale of goods or services on account
The amounts owed by company towards vendors for purchases of
goods or services on account
5. Which equation represents the relationship between sales, variable costs,
fixed costs, and profit in cost-volume-profit analysis?
Sales - fixed costs - administrative costs = profit
Sales - variable costs - overhead costs = profit
Sales - variable costs - fixed costs = profit
Sales - cost of goods sold - fixed costs = profit
6. What should be done with product costs before the item is sold?
Record immediately as an expense
Record as a liability on the balance sheet
Record as a financing cash flow
Record as an inventory cost until the item is sold
7. What is the formula used to calculate gross profit?
, Accounts receivable minus accounts payable
Total revenues minus total expenses
Total assets minus total liabilities
Sales minus cost of goods sold
8. Manufacturing overhead applied is added to direct labor incurred and to
what other item to equal total manufacturing costs for the period?
Work in process
Raw materials purchased
Goods available for sale
Direct materials used
9. Describe the treatment of product costs in accounting and why it is important
for financial reporting.
Product costs are classified as financing cash flows to indicate funding
sources.
Product costs are recorded as inventory costs until sold, which
ensures accurate representation of expenses and profits.
Product costs are treated as liabilities to show potential future
obligations.
Product costs are recorded immediately as expenses to reflect current
financial status.
10. What is the ultimate purpose of the accounting cycle?
To post general journal entries to the general and subsidiary ledgers
To reverse the effects of adjusting entries in the next accounting
period
To adjust trial balances for accruals and prepayments
, To record transactions and prepare financial statements
11. What is the definition of accounts payable in accounting?
The amount owed by a company that purchased goods or services
from a supplier on credit.
The amount to be paid by a company in repayment of both loans and
dividends.
The amount owed to a company that sold goods or services to a
customer on credit.
The amount to be paid by a company for dividends to shareholders.
12. What formula is used to calculate the variable cost ratio?
Price per unit - Variable costs
Variable costs / Price per unit
Fixed costs / Total costs
Total costs / Price per unit
13. If a company incorrectly records the flow of costs by moving directly from
finished goods inventory to cost of goods sold, what impact might this have
on financial statements?
It will only affect the balance sheet.
It will only affect the cash flow statement.
It may lead to inaccurate reporting of expenses and profits.
It will have no impact on financial statements.
14. Which organization is responsible for setting accounting standards in the
U.S. for financial reporting?
Internal Revenue Service (IRS)
Verified Answers | Principles of Financial & Managerial
Accounting | 2026 Update
1. If a company has $20,000 in assets and pays $5,000 in advertising costs, what
will be the new total for assets and how will it affect the company's net
income?
Assets will total $15,000 and net income will decrease due to
increased expenses.
Assets will total $25,000 and net income will remain unchanged.
Assets will total $20,000 and net income will increase due to
decreased expenses.
Assets will total $15,000 and net income will increase due to increased
revenues.
2. Interpret how high credit sales can lead to a negative net cash position in a
month with high total sales.
High credit sales mean that cash has not yet been received, leading
to a negative net cash position despite high sales figures.
High credit sales do not impact cash flow in the same month.
High credit sales indicate that expenses are also high, which affects
net cash.
High credit sales suggest that the company is not selling enough
products.
3. What are the three main components of the accounting equation?
Liabilities, Equity, and Cash
Expenses, Dividends, and Liabilities
, Assets, Liabilities, and Equity
Revenue, Expenses, and Assets
4. Which of the following best describes accounts payable
The amount of cash owed to a company by its customers from the
sale of goods or services on account
The amount of cash not expected to be collected by a company from
its customers from the sale of goods or services on account (bad
debts)
Amount of cash collected by a company from its customers from the
sale of goods or services on account
The amounts owed by company towards vendors for purchases of
goods or services on account
5. Which equation represents the relationship between sales, variable costs,
fixed costs, and profit in cost-volume-profit analysis?
Sales - fixed costs - administrative costs = profit
Sales - variable costs - overhead costs = profit
Sales - variable costs - fixed costs = profit
Sales - cost of goods sold - fixed costs = profit
6. What should be done with product costs before the item is sold?
Record immediately as an expense
Record as a liability on the balance sheet
Record as a financing cash flow
Record as an inventory cost until the item is sold
7. What is the formula used to calculate gross profit?
, Accounts receivable minus accounts payable
Total revenues minus total expenses
Total assets minus total liabilities
Sales minus cost of goods sold
8. Manufacturing overhead applied is added to direct labor incurred and to
what other item to equal total manufacturing costs for the period?
Work in process
Raw materials purchased
Goods available for sale
Direct materials used
9. Describe the treatment of product costs in accounting and why it is important
for financial reporting.
Product costs are classified as financing cash flows to indicate funding
sources.
Product costs are recorded as inventory costs until sold, which
ensures accurate representation of expenses and profits.
Product costs are treated as liabilities to show potential future
obligations.
Product costs are recorded immediately as expenses to reflect current
financial status.
10. What is the ultimate purpose of the accounting cycle?
To post general journal entries to the general and subsidiary ledgers
To reverse the effects of adjusting entries in the next accounting
period
To adjust trial balances for accruals and prepayments
, To record transactions and prepare financial statements
11. What is the definition of accounts payable in accounting?
The amount owed by a company that purchased goods or services
from a supplier on credit.
The amount to be paid by a company in repayment of both loans and
dividends.
The amount owed to a company that sold goods or services to a
customer on credit.
The amount to be paid by a company for dividends to shareholders.
12. What formula is used to calculate the variable cost ratio?
Price per unit - Variable costs
Variable costs / Price per unit
Fixed costs / Total costs
Total costs / Price per unit
13. If a company incorrectly records the flow of costs by moving directly from
finished goods inventory to cost of goods sold, what impact might this have
on financial statements?
It will only affect the balance sheet.
It will only affect the cash flow statement.
It may lead to inaccurate reporting of expenses and profits.
It will have no impact on financial statements.
14. Which organization is responsible for setting accounting standards in the
U.S. for financial reporting?
Internal Revenue Service (IRS)
