Western Governors University
AFT2 – Task 4
Financial Accounting Objective Assessment
Actual Questions and Answers | 2026 Update | 100% Correct
Institution: Western Governors University (WGU)
Course: AFT2 – Financial Accounting Fundamentals
Assessment: Task 4 / Objective Assessment (OA)
Questions: 70 Multiple Choice (A–D)
Date: July 8, 2026
Academic Year: 2026–2027
Cognitive Level: 30% Recall | 50% Application | 20% Analysis
Standards: GAAP, FASB ASUs (through 2026), WGU AFT2 Competencies
, WGU AFT2 Task 4 | Financial Accounting | 2026
Section 1: Accounting Principles, Concepts, & The Accounting Cycle (Q1–Q15)
Q1. Under the conceptual framework of accounting, which qualitative characteristic of useful financial information
requires that information be available to decision-makers before it loses its capacity to influence decisions?
A. Reliability
B. Timeliness [CORRECT]
C. Conservatism
D. Materiality
Correct Answer: B
Rationale: Timeliness is the qualitative characteristic requiring that information be available to decision-makers in time to
influence their decisions. Reliability (A) refers to the trustworthiness of information. Conservatism (C) is a prudence
convention, not a qualitative characteristic under the FASB conceptual framework. Materiality (D) is an underlying
constraint, not a qualitative characteristic. Students often confuse timeliness with relevance, but timeliness is a separate
enhancing quality.
Q2. Which of the following best describes the going concern assumption under GAAP?
A. The entity will be liquidated within the next fiscal year
B. The entity will continue to operate indefinitely unless evidence exists to the contrary [CORRECT]
C. The entity must prepare financial statements every calendar year
D. The entity will not issue stock dividends to common shareholders
Correct Answer: B
Rationale: The going concern assumption states that the entity will continue operating in the foreseeable future, typically
considered to be at least one year beyond the financial statement date. This assumption justifies using historical cost for
asset valuation and classifying assets and liabilities as current or long-term. Option (A) describes liquidation basis
accounting, the opposite of going concern. Option (C) relates to the periodicity assumption. Option (D) is unrelated to the
going concern concept.
Q3. A company receives $12,000 in advance from a customer for services to be performed over the next six months.
Under the revenue recognition principle (ASC 606), how should this transaction be recorded on the date of receipt?
A. Debit Cash $12,000; Credit Service Revenue $12,000
B. Debit Cash $12,000; Credit Unearned Revenue $12,000 [CORRECT]
C. Debit Unearned Revenue $12,000; Credit Cash $12,000
D. Debit Service Revenue $12,000; Credit Accounts Receivable $12,000
Correct Answer: B
Rationale: Under ASC 606, revenue is recognized when (or as) a performance obligation is satisfied. Since no services
have been performed at the receipt date, the $12,000 represents a liability (Unearned Revenue), not earned revenue. The
correct entry is a debit to Cash and a credit to Unearned Revenue for $12,000. Option (A) incorrectly recognizes all
revenue immediately. Option (C) reverses the debit and credit. Option (D) debits revenue and credits receivable, which is
the entry for recognizing revenue after providing services on account, not for receiving cash in advance.
Q4. A trial balance has total debits of $487,500 and total credits of $486,000. Which of the following actions is the most
appropriate first step to locate the error?
A. Divide the difference by 2 and search for that amount as a misplaced debit or credit
B. Prepare closing entries and re-check the post-closing trial balance
C. Divide the difference by 9 to check for a transposition or slide error
D. Both A and C are appropriate first steps [CORRECT]
Correct Answer: D
Rationale: When a trial balance is out of balance, the difference of $1,500 should first be checked using two common
techniques: (1) divide by 2 ($750) to see if an amount was posted to the wrong side (debit vs. credit), and (2) divide by 9
($166.67) to check for a transposition error (e.g., writing $540 as $450) or slide error (e.g., $100 as $1,000). Since $1,500 /
9 = $166.67, this does not produce a whole number, making a transposition error less likely, but checking both methods is
standard procedure. Option (B) is incorrect because closing entries should not be prepared until the trial balance balances.
Q5. During the accounting cycle, which of the following sequences correctly represents the order of steps after
transactions are identified and analyzed?
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, WGU AFT2 Task 4 | Financial Accounting | 2026
A. Journalize, post to ledger, prepare trial balance, adjust entries, prepare financial statements, close, post-closing
trial balance [CORRECT]
B. Post to ledger, journalize, prepare trial balance, close, adjust entries, prepare financial statements
C. Journalize, prepare trial balance, post to ledger, close, adjust entries, prepare financial statements
D. Adjust entries, journalize, post to ledger, prepare trial balance, prepare financial statements, close
Correct Answer: A
Rationale: The correct sequence of the accounting cycle is: (1) Identify and analyze transactions, (2) Journalize in the
general journal, (3) Post to the general ledger, (4) Prepare an unadjusted trial balance, (5) Record adjusting entries and
post to the ledger, (6) Prepare an adjusted trial balance, (7) Prepare financial statements, (8) Record closing entries and
post, (9) Prepare a post-closing trial balance. Option (B) reverses journalizing and posting. Option (C) places the trial
balance before posting. Option (D) places adjusting entries before journalizing, which is impossible.
Q6. A company uses the accrual basis of accounting. At year-end, $3,200 of salaries earned by employees in December
have not yet been paid. The adjusting entry required is:
A. Debit Salaries Expense $3,200; Credit Salaries Payable $3,200 [CORRECT]
B. Debit Salaries Payable $3,200; Credit Salaries Expense $3,200
C. Debit Salaries Expense $3,200; Credit Cash $3,200
D. No entry is needed until the salaries are actually paid
Correct Answer: A
Rationale: Under accrual accounting, expenses must be recognized in the period in which they are incurred, regardless of
when cash is paid. The $3,200 represents an accrued expense, requiring an adjusting entry to debit Salaries Expense and
credit Salaries Payable (a current liability). Option (B) reverses the entry. Option (C) credits Cash, but no cash has been
paid yet. Option (D) describes cash-basis treatment, which violates GAAP accrual principles.
Q7. Which accounting principle most directly supports the practice of recording a $25 stapler as an expense rather than
as an asset, even though it will benefit multiple periods?
A. Matching principle
B. Materiality constraint [CORRECT]
C. Revenue recognition principle
D. Full disclosure principle
Correct Answer: B
Rationale: The materiality constraint allows accountants to bypass strict GAAP treatment for items that are too small to
influence user decisions. A $25 stapler, while technically a long-lived asset, is immaterial and can be expensed
immediately for practical efficiency. The matching principle (A) requires expenses to be matched with revenues in the
period they help generate. The revenue recognition principle (C) governs when revenue is recorded. The full disclosure
principle (D) requires all material information to be disclosed in the notes.
Q8. The accounting equation (Assets = Liabilities + Stockholders' Equity) must always remain in balance. If a company
borrows $15,000 from a bank by signing a note payable, what is the effect on the equation?
A. Assets increase $15,000; Liabilities increase $15,000; Equity unchanged [CORRECT]
B. Assets increase $15,000; Equity increases $15,000; Liabilities unchanged
C. Liabilities increase $15,000; Equity decreases $15,000; Assets unchanged
D. Assets decrease $15,000; Liabilities decrease $15,000; Equity unchanged
Correct Answer: A
Rationale: Borrowing $15,000 increases Cash (an asset) by $15,000 and increases Notes Payable (a liability) by $15,000.
Stockholders' Equity is unaffected. The equation remains in balance: +$15,000 (Assets) = +$15,000 (Liabilities) + $0
(Equity). Option (B) incorrectly increases equity. Option (C) incorrectly decreases equity. Option (D) describes repayment
of the note, not borrowing.
Q9. A company purchased office supplies for $1,800 during the year. At year-end, a physical count reveals $500 of
supplies still on hand. If the company initially recorded the purchase as an asset (Supplies), the adjusting entry is:
A. Debit Supplies Expense $1,300; Credit Supplies $1,300 [CORRECT]
B. Debit Supplies Expense $500; Credit Supplies $500
C. Debit Supplies $1,300; Credit Supplies Expense $1,300
D. Debit Supplies $500; Credit Supplies Expense $500
Correct Answer: A
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AFT2 – Task 4
Financial Accounting Objective Assessment
Actual Questions and Answers | 2026 Update | 100% Correct
Institution: Western Governors University (WGU)
Course: AFT2 – Financial Accounting Fundamentals
Assessment: Task 4 / Objective Assessment (OA)
Questions: 70 Multiple Choice (A–D)
Date: July 8, 2026
Academic Year: 2026–2027
Cognitive Level: 30% Recall | 50% Application | 20% Analysis
Standards: GAAP, FASB ASUs (through 2026), WGU AFT2 Competencies
, WGU AFT2 Task 4 | Financial Accounting | 2026
Section 1: Accounting Principles, Concepts, & The Accounting Cycle (Q1–Q15)
Q1. Under the conceptual framework of accounting, which qualitative characteristic of useful financial information
requires that information be available to decision-makers before it loses its capacity to influence decisions?
A. Reliability
B. Timeliness [CORRECT]
C. Conservatism
D. Materiality
Correct Answer: B
Rationale: Timeliness is the qualitative characteristic requiring that information be available to decision-makers in time to
influence their decisions. Reliability (A) refers to the trustworthiness of information. Conservatism (C) is a prudence
convention, not a qualitative characteristic under the FASB conceptual framework. Materiality (D) is an underlying
constraint, not a qualitative characteristic. Students often confuse timeliness with relevance, but timeliness is a separate
enhancing quality.
Q2. Which of the following best describes the going concern assumption under GAAP?
A. The entity will be liquidated within the next fiscal year
B. The entity will continue to operate indefinitely unless evidence exists to the contrary [CORRECT]
C. The entity must prepare financial statements every calendar year
D. The entity will not issue stock dividends to common shareholders
Correct Answer: B
Rationale: The going concern assumption states that the entity will continue operating in the foreseeable future, typically
considered to be at least one year beyond the financial statement date. This assumption justifies using historical cost for
asset valuation and classifying assets and liabilities as current or long-term. Option (A) describes liquidation basis
accounting, the opposite of going concern. Option (C) relates to the periodicity assumption. Option (D) is unrelated to the
going concern concept.
Q3. A company receives $12,000 in advance from a customer for services to be performed over the next six months.
Under the revenue recognition principle (ASC 606), how should this transaction be recorded on the date of receipt?
A. Debit Cash $12,000; Credit Service Revenue $12,000
B. Debit Cash $12,000; Credit Unearned Revenue $12,000 [CORRECT]
C. Debit Unearned Revenue $12,000; Credit Cash $12,000
D. Debit Service Revenue $12,000; Credit Accounts Receivable $12,000
Correct Answer: B
Rationale: Under ASC 606, revenue is recognized when (or as) a performance obligation is satisfied. Since no services
have been performed at the receipt date, the $12,000 represents a liability (Unearned Revenue), not earned revenue. The
correct entry is a debit to Cash and a credit to Unearned Revenue for $12,000. Option (A) incorrectly recognizes all
revenue immediately. Option (C) reverses the debit and credit. Option (D) debits revenue and credits receivable, which is
the entry for recognizing revenue after providing services on account, not for receiving cash in advance.
Q4. A trial balance has total debits of $487,500 and total credits of $486,000. Which of the following actions is the most
appropriate first step to locate the error?
A. Divide the difference by 2 and search for that amount as a misplaced debit or credit
B. Prepare closing entries and re-check the post-closing trial balance
C. Divide the difference by 9 to check for a transposition or slide error
D. Both A and C are appropriate first steps [CORRECT]
Correct Answer: D
Rationale: When a trial balance is out of balance, the difference of $1,500 should first be checked using two common
techniques: (1) divide by 2 ($750) to see if an amount was posted to the wrong side (debit vs. credit), and (2) divide by 9
($166.67) to check for a transposition error (e.g., writing $540 as $450) or slide error (e.g., $100 as $1,000). Since $1,500 /
9 = $166.67, this does not produce a whole number, making a transposition error less likely, but checking both methods is
standard procedure. Option (B) is incorrect because closing entries should not be prepared until the trial balance balances.
Q5. During the accounting cycle, which of the following sequences correctly represents the order of steps after
transactions are identified and analyzed?
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, WGU AFT2 Task 4 | Financial Accounting | 2026
A. Journalize, post to ledger, prepare trial balance, adjust entries, prepare financial statements, close, post-closing
trial balance [CORRECT]
B. Post to ledger, journalize, prepare trial balance, close, adjust entries, prepare financial statements
C. Journalize, prepare trial balance, post to ledger, close, adjust entries, prepare financial statements
D. Adjust entries, journalize, post to ledger, prepare trial balance, prepare financial statements, close
Correct Answer: A
Rationale: The correct sequence of the accounting cycle is: (1) Identify and analyze transactions, (2) Journalize in the
general journal, (3) Post to the general ledger, (4) Prepare an unadjusted trial balance, (5) Record adjusting entries and
post to the ledger, (6) Prepare an adjusted trial balance, (7) Prepare financial statements, (8) Record closing entries and
post, (9) Prepare a post-closing trial balance. Option (B) reverses journalizing and posting. Option (C) places the trial
balance before posting. Option (D) places adjusting entries before journalizing, which is impossible.
Q6. A company uses the accrual basis of accounting. At year-end, $3,200 of salaries earned by employees in December
have not yet been paid. The adjusting entry required is:
A. Debit Salaries Expense $3,200; Credit Salaries Payable $3,200 [CORRECT]
B. Debit Salaries Payable $3,200; Credit Salaries Expense $3,200
C. Debit Salaries Expense $3,200; Credit Cash $3,200
D. No entry is needed until the salaries are actually paid
Correct Answer: A
Rationale: Under accrual accounting, expenses must be recognized in the period in which they are incurred, regardless of
when cash is paid. The $3,200 represents an accrued expense, requiring an adjusting entry to debit Salaries Expense and
credit Salaries Payable (a current liability). Option (B) reverses the entry. Option (C) credits Cash, but no cash has been
paid yet. Option (D) describes cash-basis treatment, which violates GAAP accrual principles.
Q7. Which accounting principle most directly supports the practice of recording a $25 stapler as an expense rather than
as an asset, even though it will benefit multiple periods?
A. Matching principle
B. Materiality constraint [CORRECT]
C. Revenue recognition principle
D. Full disclosure principle
Correct Answer: B
Rationale: The materiality constraint allows accountants to bypass strict GAAP treatment for items that are too small to
influence user decisions. A $25 stapler, while technically a long-lived asset, is immaterial and can be expensed
immediately for practical efficiency. The matching principle (A) requires expenses to be matched with revenues in the
period they help generate. The revenue recognition principle (C) governs when revenue is recorded. The full disclosure
principle (D) requires all material information to be disclosed in the notes.
Q8. The accounting equation (Assets = Liabilities + Stockholders' Equity) must always remain in balance. If a company
borrows $15,000 from a bank by signing a note payable, what is the effect on the equation?
A. Assets increase $15,000; Liabilities increase $15,000; Equity unchanged [CORRECT]
B. Assets increase $15,000; Equity increases $15,000; Liabilities unchanged
C. Liabilities increase $15,000; Equity decreases $15,000; Assets unchanged
D. Assets decrease $15,000; Liabilities decrease $15,000; Equity unchanged
Correct Answer: A
Rationale: Borrowing $15,000 increases Cash (an asset) by $15,000 and increases Notes Payable (a liability) by $15,000.
Stockholders' Equity is unaffected. The equation remains in balance: +$15,000 (Assets) = +$15,000 (Liabilities) + $0
(Equity). Option (B) incorrectly increases equity. Option (C) incorrectly decreases equity. Option (D) describes repayment
of the note, not borrowing.
Q9. A company purchased office supplies for $1,800 during the year. At year-end, a physical count reveals $500 of
supplies still on hand. If the company initially recorded the purchase as an asset (Supplies), the adjusting entry is:
A. Debit Supplies Expense $1,300; Credit Supplies $1,300 [CORRECT]
B. Debit Supplies Expense $500; Credit Supplies $500
C. Debit Supplies $1,300; Credit Supplies Expense $1,300
D. Debit Supplies $500; Credit Supplies Expense $500
Correct Answer: A
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