WGU D774 Business Accounting Study
Guide (2026/2027) | Objective
Assessment Prep 2026/2027 – Verified
Q&As with Detailed Rationales (Test
Bank Bundle - 68 Questions)
---
*QUESTION 1:*
The accounting equation is:
A) Assets = Liabilities + Equity
B) Assets = Liabilities - Equity
C) Assets + Liabilities = Equity
D) Assets = Revenues + Expenses
> 🎯 *CORRECT ANSWER:* A) Assets = Liabilities + Equity
> 💡 *CLINICAL RATIONALE:*
> * *Why It's Right:* Fundamental equation.
> * *Why Distractors Fail:* Subtraction/equality/revenue are incorrect.
> * *Core Takeaway:* Assets = Liabilities + Equity.
---
*QUESTION 2:*
A debit entry will increase:
,A) Liabilities
B) Equity
C) Assets
D) Revenue
> 🎯 *CORRECT ANSWER:* C) Assets
> 💡 *CLINICAL RATIONALE:*
> * *Why It's Right:* Asset accounts have a normal debit balance.
> * *Why Distractors Fail:* Liabilities/equity/revenue have normal credit balances.
> * *Core Takeaway:* Debit = increase assets.
---
*QUESTION 3:*
Which financial statement reports revenues and expenses?
A) Balance sheet
B) Income statement
C) Statement of cash flows
D) Statement of retained earnings
> 🎯 *CORRECT ANSWER:* B) Income statement
> 💡 *CLINICAL RATIONALE:*
> * *Why It's Right:* Measures profitability.
> * *Why Distractors Fail:* Balance sheet = assets/liabilities/equity; cash flows = cash; retained earnings
= equity changes.
> * *Core Takeaway:* Income statement = revenues/expenses.
---
*QUESTION 4:*
,The accrual basis of accounting recognizes revenue when:
A) Cash is received
B) It is earned, regardless of cash receipt
C) The invoice is sent
D) The customer places an order
> 🎯 *CORRECT ANSWER:* B) It is earned, regardless of cash receipt
> 💡 *CLINICAL RATIONALE:*
> * *Why It's Right:* Matching principle.
> * *Why Distractors Fail:* Cash receipt is cash basis; invoice/order are not revenue recognition.
> * *Core Takeaway:* Accrual = earned revenue.
---
*QUESTION 5:*
A company has $100,000 in assets and $40,000 in liabilities. What is the equity?
A) $140,000
B) $60,000
C) $40,000
D) $100,000
> 🎯 *CORRECT ANSWER:* B) $60,000
> 💡 *CLINICAL RATIONALE:*
> * *Why It's Right:* Equity = Assets - Liabilities.
> * *Why Distractors Fail:* 140k is sum; 40k is liability; 100k is assets.
> * *Core Takeaway:* Equity = 100k - 40k = 60k.
---
, *QUESTION 6:*
A credit entry will increase:
A) Assets
B) Dividends
C) Expenses
D) Liabilities
> 🎯 *CORRECT ANSWER:* D) Liabilities
> 💡 *CLINICAL RATIONALE:*
> * *Why It's Right:* Liability accounts have normal credit balance.
> * *Why Distractors Fail:* Assets/dividends/expenses have normal debit balances.
> * *Core Takeaway:* Credit = increase liabilities.
---
*QUESTION 7:*
Which account is NOT closed at the end of the accounting period?
A) Revenue
B) Expense
C) Dividends
D) Cash
> 🎯 *CORRECT ANSWER:* D) Cash
> 💡 *CLINICAL RATIONALE:*
> * *Why It's Right:* Permanent account.
> * *Why Distractors Fail:* Revenues/expenses/dividends are temporary accounts.
> * *Core Takeaway:* Cash = permanent.
Guide (2026/2027) | Objective
Assessment Prep 2026/2027 – Verified
Q&As with Detailed Rationales (Test
Bank Bundle - 68 Questions)
---
*QUESTION 1:*
The accounting equation is:
A) Assets = Liabilities + Equity
B) Assets = Liabilities - Equity
C) Assets + Liabilities = Equity
D) Assets = Revenues + Expenses
> 🎯 *CORRECT ANSWER:* A) Assets = Liabilities + Equity
> 💡 *CLINICAL RATIONALE:*
> * *Why It's Right:* Fundamental equation.
> * *Why Distractors Fail:* Subtraction/equality/revenue are incorrect.
> * *Core Takeaway:* Assets = Liabilities + Equity.
---
*QUESTION 2:*
A debit entry will increase:
,A) Liabilities
B) Equity
C) Assets
D) Revenue
> 🎯 *CORRECT ANSWER:* C) Assets
> 💡 *CLINICAL RATIONALE:*
> * *Why It's Right:* Asset accounts have a normal debit balance.
> * *Why Distractors Fail:* Liabilities/equity/revenue have normal credit balances.
> * *Core Takeaway:* Debit = increase assets.
---
*QUESTION 3:*
Which financial statement reports revenues and expenses?
A) Balance sheet
B) Income statement
C) Statement of cash flows
D) Statement of retained earnings
> 🎯 *CORRECT ANSWER:* B) Income statement
> 💡 *CLINICAL RATIONALE:*
> * *Why It's Right:* Measures profitability.
> * *Why Distractors Fail:* Balance sheet = assets/liabilities/equity; cash flows = cash; retained earnings
= equity changes.
> * *Core Takeaway:* Income statement = revenues/expenses.
---
*QUESTION 4:*
,The accrual basis of accounting recognizes revenue when:
A) Cash is received
B) It is earned, regardless of cash receipt
C) The invoice is sent
D) The customer places an order
> 🎯 *CORRECT ANSWER:* B) It is earned, regardless of cash receipt
> 💡 *CLINICAL RATIONALE:*
> * *Why It's Right:* Matching principle.
> * *Why Distractors Fail:* Cash receipt is cash basis; invoice/order are not revenue recognition.
> * *Core Takeaway:* Accrual = earned revenue.
---
*QUESTION 5:*
A company has $100,000 in assets and $40,000 in liabilities. What is the equity?
A) $140,000
B) $60,000
C) $40,000
D) $100,000
> 🎯 *CORRECT ANSWER:* B) $60,000
> 💡 *CLINICAL RATIONALE:*
> * *Why It's Right:* Equity = Assets - Liabilities.
> * *Why Distractors Fail:* 140k is sum; 40k is liability; 100k is assets.
> * *Core Takeaway:* Equity = 100k - 40k = 60k.
---
, *QUESTION 6:*
A credit entry will increase:
A) Assets
B) Dividends
C) Expenses
D) Liabilities
> 🎯 *CORRECT ANSWER:* D) Liabilities
> 💡 *CLINICAL RATIONALE:*
> * *Why It's Right:* Liability accounts have normal credit balance.
> * *Why Distractors Fail:* Assets/dividends/expenses have normal debit balances.
> * *Core Takeaway:* Credit = increase liabilities.
---
*QUESTION 7:*
Which account is NOT closed at the end of the accounting period?
A) Revenue
B) Expense
C) Dividends
D) Cash
> 🎯 *CORRECT ANSWER:* D) Cash
> 💡 *CLINICAL RATIONALE:*
> * *Why It's Right:* Permanent account.
> * *Why Distractors Fail:* Revenues/expenses/dividends are temporary accounts.
> * *Core Takeaway:* Cash = permanent.
