WSP ACCOUNTING ACTUAL EXAM PAPER
2026 QUESTIONS WITH SOLUTIONS
GRADED A+
●● Revenue Recognition Principle.
Answer: -requires that companies recognize revenue in the accounting
period in which the performance obligation is satisfied
-Revenues must be recorded when earned and measurable
-Does not matter when cash transfers occur
-until that order is shipped to a customer and collection from that
customer, who used a credit card, is reasonably assured
●● Matching Principle.
Answer: -Costs of a product must be recorded during the same period as
revenue from selling it
●● Income Statement.
Answer: -is a financial report that depicts the operating performance of a
company (i.e. revenues less expenses generated - i.e. profitability) over a
specific period of time (typically a quarter or year).
-analysts can use THIS to identify the components and sources
("drivers") of net earnings.
,●● Revenues/Net Revenues (Net Sales).
Answer: -Total dollar payment for goods and services that are credited to
an income statement over a particular time period
-A company may have other income streams, which are not related to its
main operations
Ex. Interest income earned from investments and Income received from
a legal settlement
●● Cost of Goods Sold.
Answer: -represents a company's direct cost of manufacture (for
manufacturers) or procurement (for merchandisers) of a good or service
that the company sells to generate revenue
-DOES NOT INCLUDE
Ex. corporate overhead, marketing and administrative expenses, research
and development, and salaries of employees not associated directly with
the manufacture or procurement of a good or service
●● Gross Profit (Gross Margin).
Answer: -Revenues - Cost of Goods Sold
●● Selling, General & Administrative (SG&A).
Answer: -Operating costs not directly associated with the production or
procurement of the product or service that the company sells to generate
revenue. Payroll, wages, commissions, meal and travel expenses,
stationary, advertising, and marketing expenses fall under this line item.
, ●● Research & Development (R&D).
Answer: -A company's activities that are directed at developing new
products or procedures.
●● EBITDA(Earnings before interest, taxes, depreciation, and
amortization).
Answer: -Gross Profit - SG&A - R&D. is a popular measure of a
company's financial performance
-which starts with EBIT but adds back D&A expense
The rationale for using THIS as a way to compare companies is twofold:
1. D&A is a huge noncash expense for fixed asset and intangible asset-
intensive businesses, and stripping out the biggest noncash expense
provides a more accurate picture of "real" profits during the year.
2. Since companies can use different useful life assumptions and even
depreciation methods to calculate D&A this can significantly skew the
comparison of operating profitability across two otherwise identical
firms
●● Depreciation.
Answer: -quantifies the wear and tear (from use and passage of time) of
the physical asset through a systematic decrease (depreciation) of the
assets' book (historical) value
-Accrual accounting (and specifically the matching principle) dictates
that we spread the cost evenly over the life of the asset so that costs are
2026 QUESTIONS WITH SOLUTIONS
GRADED A+
●● Revenue Recognition Principle.
Answer: -requires that companies recognize revenue in the accounting
period in which the performance obligation is satisfied
-Revenues must be recorded when earned and measurable
-Does not matter when cash transfers occur
-until that order is shipped to a customer and collection from that
customer, who used a credit card, is reasonably assured
●● Matching Principle.
Answer: -Costs of a product must be recorded during the same period as
revenue from selling it
●● Income Statement.
Answer: -is a financial report that depicts the operating performance of a
company (i.e. revenues less expenses generated - i.e. profitability) over a
specific period of time (typically a quarter or year).
-analysts can use THIS to identify the components and sources
("drivers") of net earnings.
,●● Revenues/Net Revenues (Net Sales).
Answer: -Total dollar payment for goods and services that are credited to
an income statement over a particular time period
-A company may have other income streams, which are not related to its
main operations
Ex. Interest income earned from investments and Income received from
a legal settlement
●● Cost of Goods Sold.
Answer: -represents a company's direct cost of manufacture (for
manufacturers) or procurement (for merchandisers) of a good or service
that the company sells to generate revenue
-DOES NOT INCLUDE
Ex. corporate overhead, marketing and administrative expenses, research
and development, and salaries of employees not associated directly with
the manufacture or procurement of a good or service
●● Gross Profit (Gross Margin).
Answer: -Revenues - Cost of Goods Sold
●● Selling, General & Administrative (SG&A).
Answer: -Operating costs not directly associated with the production or
procurement of the product or service that the company sells to generate
revenue. Payroll, wages, commissions, meal and travel expenses,
stationary, advertising, and marketing expenses fall under this line item.
, ●● Research & Development (R&D).
Answer: -A company's activities that are directed at developing new
products or procedures.
●● EBITDA(Earnings before interest, taxes, depreciation, and
amortization).
Answer: -Gross Profit - SG&A - R&D. is a popular measure of a
company's financial performance
-which starts with EBIT but adds back D&A expense
The rationale for using THIS as a way to compare companies is twofold:
1. D&A is a huge noncash expense for fixed asset and intangible asset-
intensive businesses, and stripping out the biggest noncash expense
provides a more accurate picture of "real" profits during the year.
2. Since companies can use different useful life assumptions and even
depreciation methods to calculate D&A this can significantly skew the
comparison of operating profitability across two otherwise identical
firms
●● Depreciation.
Answer: -quantifies the wear and tear (from use and passage of time) of
the physical asset through a systematic decrease (depreciation) of the
assets' book (historical) value
-Accrual accounting (and specifically the matching principle) dictates
that we spread the cost evenly over the life of the asset so that costs are
