WGU D102: FINANCIAL ACCOUNTING | 2026/2027 COMPLETE EXAM REAL
QUESTIONS + DETAILED ANSWERS - LATEST VERSION - TOP RATED
1. Which financial statement reports a company's revenues and expenses over a
specific period?
A. Balance sheet
B. Income statement
C. Statement of cash flows
D. Statement of retained earnings
2. The accounting equation is best expressed as:
A. Assets = Liabilities + Owner's Equity
B. Assets + Liabilities = Owner's Equity
C. Assets = Revenue – Expenses
D. Liabilities = Assets + Owner's Equity
3. Which principle requires that expenses be recorded in the same period as the
revenues they help generate?
A. Revenue recognition principle
B. Cost principle
C. Matching principle
D. Full disclosure principle
4. Accounts that normally carry a credit balance include:
A. Cash and accounts receivable
B. Equipment and prepaid expenses
C. Revenue and liabilities
D. Dividends and expenses
5. A trial balance is prepared to verify that:
A. All accounts have been closed
B. Total debits equal total credits
C. Revenue exceeds expenses
D. Cash is properly reported
,6. Which of the following is NOT a component of the balance sheet?
A. Assets
B. Liabilities
C. Revenues
D. Owner's equity
7. Under accrual basis accounting, revenue is recognized when:
A. Cash is received from the customer
B. The order is placed by the customer
C. It is earned, regardless of when cash is received
D. The invoice is mailed
8. Depreciation is best described as:
A. A method of saving cash for asset replacement
B. The allocation of an asset's cost over its useful life
C. The decrease in market value of an asset
D. A cash expense paid annually
9. Which inventory costing method assumes the last items purchased are the first
items sold?
A. FIFO
B. Weighted average
C. Specific identification
D. LIFO
10. Prepaid insurance is classified as a(n):
A. Liability
B. Expense
C. Asset
D. Revenue
11. Which of the following best describes a contra asset account?
A. An account with a normal credit balance that offsets an asset
B. An account that records asset purchases
C. A liability account related to assets
D. An account that increases owner's equity
12. The purpose of closing entries is to:
, A. Update the trial balance
B. Transfer temporary account balances to retained earnings
C. Correct errors in the ledger
D. Record depreciation for the period
13. Accounts receivable is reported on which financial statement?
A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
14. Which of the following is considered a current liability?
A. Notes payable due in 3 years
B. Mortgage payable
C. Accounts payable
D. Bonds payable due in 10 years
15. The direct write-off method of accounting for uncollectible accounts:
A. Violates the matching principle
B. Is required under GAAP
C. Uses an allowance account
D. Records bad debts when credit is extended
16. What does the term 'liquidity' refer to in accounting?
A. The ability to generate profit
B. The ease with which assets can be converted to cash
C. The total amount of long-term debt
D. The company's market capitalization
17. Under the allowance method, recording an estimated bad debt expense:
A. Debits bad debt expense and credits accounts receivable
B. Debits bad debt expense and credits allowance for doubtful accounts
C. Debits allowance for doubtful accounts and credits cash
D. Has no effect on net income
18. Which financial statement shows the changes in stockholders' equity during a
period?
A. Balance sheet
, B. Income statement
C. Statement of stockholders' equity
D. Statement of cash flows
19. When a business purchases supplies on account, the journal entry includes:
A. Debit Supplies Expense; Credit Cash
B. Debit Supplies; Credit Cash
C. Debit Supplies; Credit Accounts Payable
D. Debit Accounts Payable; Credit Supplies
20. Which of the following is a long-term asset?
A. Accounts receivable
B. Prepaid expenses
C. Buildings
D. Inventory
21. The cost of goods sold is found on which financial statement?
A. Balance sheet
B. Statement of cash flows
C. Statement of retained earnings
D. Income statement
22. A post-closing trial balance includes only:
A. Temporary accounts
B. Revenue and expense accounts
C. Permanent accounts
D. Dividend accounts
23. Which of the following is an example of an operating activity on the statement
of cash flows?
A. Issuing common stock
B. Purchasing equipment
C. Collecting cash from customers
D. Paying dividends
24. The going concern assumption means:
A. A business will operate indefinitely
B. All transactions are recorded at historical cost
QUESTIONS + DETAILED ANSWERS - LATEST VERSION - TOP RATED
1. Which financial statement reports a company's revenues and expenses over a
specific period?
A. Balance sheet
B. Income statement
C. Statement of cash flows
D. Statement of retained earnings
2. The accounting equation is best expressed as:
A. Assets = Liabilities + Owner's Equity
B. Assets + Liabilities = Owner's Equity
C. Assets = Revenue – Expenses
D. Liabilities = Assets + Owner's Equity
3. Which principle requires that expenses be recorded in the same period as the
revenues they help generate?
A. Revenue recognition principle
B. Cost principle
C. Matching principle
D. Full disclosure principle
4. Accounts that normally carry a credit balance include:
A. Cash and accounts receivable
B. Equipment and prepaid expenses
C. Revenue and liabilities
D. Dividends and expenses
5. A trial balance is prepared to verify that:
A. All accounts have been closed
B. Total debits equal total credits
C. Revenue exceeds expenses
D. Cash is properly reported
,6. Which of the following is NOT a component of the balance sheet?
A. Assets
B. Liabilities
C. Revenues
D. Owner's equity
7. Under accrual basis accounting, revenue is recognized when:
A. Cash is received from the customer
B. The order is placed by the customer
C. It is earned, regardless of when cash is received
D. The invoice is mailed
8. Depreciation is best described as:
A. A method of saving cash for asset replacement
B. The allocation of an asset's cost over its useful life
C. The decrease in market value of an asset
D. A cash expense paid annually
9. Which inventory costing method assumes the last items purchased are the first
items sold?
A. FIFO
B. Weighted average
C. Specific identification
D. LIFO
10. Prepaid insurance is classified as a(n):
A. Liability
B. Expense
C. Asset
D. Revenue
11. Which of the following best describes a contra asset account?
A. An account with a normal credit balance that offsets an asset
B. An account that records asset purchases
C. A liability account related to assets
D. An account that increases owner's equity
12. The purpose of closing entries is to:
, A. Update the trial balance
B. Transfer temporary account balances to retained earnings
C. Correct errors in the ledger
D. Record depreciation for the period
13. Accounts receivable is reported on which financial statement?
A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
14. Which of the following is considered a current liability?
A. Notes payable due in 3 years
B. Mortgage payable
C. Accounts payable
D. Bonds payable due in 10 years
15. The direct write-off method of accounting for uncollectible accounts:
A. Violates the matching principle
B. Is required under GAAP
C. Uses an allowance account
D. Records bad debts when credit is extended
16. What does the term 'liquidity' refer to in accounting?
A. The ability to generate profit
B. The ease with which assets can be converted to cash
C. The total amount of long-term debt
D. The company's market capitalization
17. Under the allowance method, recording an estimated bad debt expense:
A. Debits bad debt expense and credits accounts receivable
B. Debits bad debt expense and credits allowance for doubtful accounts
C. Debits allowance for doubtful accounts and credits cash
D. Has no effect on net income
18. Which financial statement shows the changes in stockholders' equity during a
period?
A. Balance sheet
, B. Income statement
C. Statement of stockholders' equity
D. Statement of cash flows
19. When a business purchases supplies on account, the journal entry includes:
A. Debit Supplies Expense; Credit Cash
B. Debit Supplies; Credit Cash
C. Debit Supplies; Credit Accounts Payable
D. Debit Accounts Payable; Credit Supplies
20. Which of the following is a long-term asset?
A. Accounts receivable
B. Prepaid expenses
C. Buildings
D. Inventory
21. The cost of goods sold is found on which financial statement?
A. Balance sheet
B. Statement of cash flows
C. Statement of retained earnings
D. Income statement
22. A post-closing trial balance includes only:
A. Temporary accounts
B. Revenue and expense accounts
C. Permanent accounts
D. Dividend accounts
23. Which of the following is an example of an operating activity on the statement
of cash flows?
A. Issuing common stock
B. Purchasing equipment
C. Collecting cash from customers
D. Paying dividends
24. The going concern assumption means:
A. A business will operate indefinitely
B. All transactions are recorded at historical cost
