WGU D774 Exam | Introduction to
Business Accounting | Objective
Assessment Exam | 100% Correct &
Rated A+ | 2025/2026 Guide
DOMAIN 1: ACCOUNTING FUNDAMENTALS & THE
ACCOUNTING EQUATION
Question 1
What is the fundamental accounting equation?
A) Assets = Liabilities − Owner's Equity
B) Assets = Liabilities + Owner's Equity
C) Assets + Liabilities = Owner's Equity
D) Liabilities = Assets + Owner's Equity
Correct Answer: B
Rationale: The fundamental accounting equation states that Assets =
Liabilities + Owner's Equity. This equation must always remain in
balance after every transaction and serves as the foundation for double-
entry bookkeeping.
,Question 2
Which of the following best defines an asset?
A) An obligation to transfer resources to another entity in the future
B) A resource owned by a business that provides future economic
benefit
C) The owner's claim on the assets of the business
D) The amount of money invested by shareholders
Correct Answer: B
Rationale: An asset is a resource owned or controlled by a business that
is expected to provide future economic benefit. Examples include cash,
equipment, inventory, and accounts receivable. Option A describes a
liability, and Option C describes equity.
Question 3
A company has total assets of $250,000 and total liabilities of $175,000.
What is the amount of owner's equity?
A) $425,000
B) $75,000
C) $175,000
D) $25,000
Correct Answer: B
,Rationale: Using the accounting equation Assets = Liabilities + Owner's
Equity, Owner's Equity = Assets − Liabilities = $250,000 − $175,000 =
$75,000.
Question 4
A company purchases equipment for $10,000, paying $2,000 in cash and
signing a note payable for the remaining $8,000. What is the net effect
on the accounting equation?
A) Assets increase by $10,000; liabilities increase by $10,000
B) Assets increase by $8,000; liabilities increase by $8,000
C) Assets increase by $10,000; assets decrease by $2,000; liabilities
increase by $8,000
D) Assets decrease by $2,000; liabilities increase by $8,000
Correct Answer: C
Rationale: Equipment (asset) increases by $10,000. Cash (asset)
decreases by $2,000. Notes payable (liability) increases by $8,000. The
net change is assets up $8,000 and liabilities up $8,000—the equation
remains balanced.
Question 5
Which of the following is classified as a current asset?
, A) Equipment
B) Accounts receivable
C) Common stock
D) Notes payable (long-term)
Correct Answer: B
Rationale: Current assets are expected to be converted to cash or used
within one year. Accounts receivable qualifies because it represents
amounts collectible in the near term. Equipment is a non-current asset,
common stock is equity, and long-term notes payable is a liability.
Question 6
If a company has assets of $500,000 and owner's equity of $200,000,
what are its total liabilities?
A) $700,000
B) $300,000
C) $200,000
D) $100,000
Correct Answer: B
Rationale: Using Assets = Liabilities + Equity, Liabilities = Assets −
Equity = $500,000 − $200,000 = $300,000.
Question 7
Business Accounting | Objective
Assessment Exam | 100% Correct &
Rated A+ | 2025/2026 Guide
DOMAIN 1: ACCOUNTING FUNDAMENTALS & THE
ACCOUNTING EQUATION
Question 1
What is the fundamental accounting equation?
A) Assets = Liabilities − Owner's Equity
B) Assets = Liabilities + Owner's Equity
C) Assets + Liabilities = Owner's Equity
D) Liabilities = Assets + Owner's Equity
Correct Answer: B
Rationale: The fundamental accounting equation states that Assets =
Liabilities + Owner's Equity. This equation must always remain in
balance after every transaction and serves as the foundation for double-
entry bookkeeping.
,Question 2
Which of the following best defines an asset?
A) An obligation to transfer resources to another entity in the future
B) A resource owned by a business that provides future economic
benefit
C) The owner's claim on the assets of the business
D) The amount of money invested by shareholders
Correct Answer: B
Rationale: An asset is a resource owned or controlled by a business that
is expected to provide future economic benefit. Examples include cash,
equipment, inventory, and accounts receivable. Option A describes a
liability, and Option C describes equity.
Question 3
A company has total assets of $250,000 and total liabilities of $175,000.
What is the amount of owner's equity?
A) $425,000
B) $75,000
C) $175,000
D) $25,000
Correct Answer: B
,Rationale: Using the accounting equation Assets = Liabilities + Owner's
Equity, Owner's Equity = Assets − Liabilities = $250,000 − $175,000 =
$75,000.
Question 4
A company purchases equipment for $10,000, paying $2,000 in cash and
signing a note payable for the remaining $8,000. What is the net effect
on the accounting equation?
A) Assets increase by $10,000; liabilities increase by $10,000
B) Assets increase by $8,000; liabilities increase by $8,000
C) Assets increase by $10,000; assets decrease by $2,000; liabilities
increase by $8,000
D) Assets decrease by $2,000; liabilities increase by $8,000
Correct Answer: C
Rationale: Equipment (asset) increases by $10,000. Cash (asset)
decreases by $2,000. Notes payable (liability) increases by $8,000. The
net change is assets up $8,000 and liabilities up $8,000—the equation
remains balanced.
Question 5
Which of the following is classified as a current asset?
, A) Equipment
B) Accounts receivable
C) Common stock
D) Notes payable (long-term)
Correct Answer: B
Rationale: Current assets are expected to be converted to cash or used
within one year. Accounts receivable qualifies because it represents
amounts collectible in the near term. Equipment is a non-current asset,
common stock is equity, and long-term notes payable is a liability.
Question 6
If a company has assets of $500,000 and owner's equity of $200,000,
what are its total liabilities?
A) $700,000
B) $300,000
C) $200,000
D) $100,000
Correct Answer: B
Rationale: Using Assets = Liabilities + Equity, Liabilities = Assets −
Equity = $500,000 − $200,000 = $300,000.
Question 7
