WGU VYC1 Principles of Accounting
Exam UPDATED ACTUAL QUESTIONS
AND CORRECT ANSWERS
Eight steps of the accounting cycle 1 - CORRECT ANSWER accounting cycle: Analyze
transactions by examining source documents 1.
Accounts Payable - CORRECT ANSWER Amounts a business must pay in the future.
Accounts Receivable - CORRECT ANSWER Claims for future collection from customers.
Assets - CORRECT ANSWER Property owned by a business.
Balance Sheet - CORRECT ANSWER A formal report of a business' financial condition on a
certain date; reports the assets, liabilities, and owner's equity of the business.
Break Even - CORRECT ANSWER A point at which revenue equals expenses.
Business Transactions - CORRECT ANSWER A financial event that changes the resources of
a firm.
Capital - CORRECT ANSWER Financial investment in a business; equity.
Equity - CORRECT ANSWER An owner's financial interest in a business.
Expense - CORRECT ANSWER An outflow of cash, use of other assets, or incurring of a
liability.
Fair Market Value - CORRECT ANSWER The current worth of an asset or the price the asset
would bring if sold on the open market.
,Fundamental Accounting Equation - CORRECT ANSWER The relationship between assets
and liabilities plus the owner's equity.
Income Statement - CORRECT ANSWER A formal report of business operations covering a
specific period of time; also called a profit and loss statement or a statement of income and expenses.
Liabilities - CORRECT ANSWER Debts or obligations of a business.
Net Income - CORRECT ANSWER The result of an excess of revenue over expenses.
Net Loss - CORRECT ANSWER The result of an excess of expenses over revenue.
On Account - CORRECT ANSWER An arrangement to allow payment at a later date; also
called a charge account or open-account credit.
Owner's Equity - CORRECT ANSWER The financial interest of the owner of a business; also
called proprietorship or net worth.
Revenue - CORRECT ANSWER An inflow of money or other assets that results from the sales
of goods or services or from the use of money or property; also called income.
Statement of Owner's Equity - CORRECT ANSWER A formal report of changes that occurred
in the owner's financial interest during a reporting period.
Withdrawals - CORRECT ANSWER Funds taken from the business by the owner for personal
use.
Accounting - CORRECT ANSWER The process by which financial information about a
business is recorded, classified, summarized, interpreted, and communicated to owners, managers,
and other interested parties.
Accounting System - CORRECT ANSWER A process designed to accumulate, classify, and
summarize financial data.
, Auditing - CORRECT ANSWER The review of financial statements to assess their fairness
and adherence to generally accepted accounting principles.
Auditor's Report - CORRECT ANSWER An independent accountant's review of a firm's
financial statements.
Certified Public Accountant (CPA) - CORRECT ANSWER An independent accountant who
provides accounting services to the public for a fee.
Corporation - CORRECT ANSWER A publicly or privately owned business entity that is
separate from its owners and has a legal right to own property and do business in its own name;
stockholders are not responsible for the debts or taxes of the business.
Creditor - CORRECT ANSWER One to whom money is owned.
Discussion Memorandum - CORRECT ANSWER An explanation of a topic under
consideration by the Financial Accounting Standards Board.
Economic Entity - CORRECT ANSWER A business or organization whose major purpose is to
produce a profit for its owners.
Entity - CORRECT ANSWER Anything having its own separate identity, such as an
individual, a town, a university, or a business.
Exposure Draft - CORRECT ANSWER A proposed solution to a problem being considered by
the Financial Accounting Standards Board.
Financial Statements - CORRECT ANSWER Periodic Reports of a firm's financial position or
operating results.
Generally Accepted Accounting Principles (GAAP) - CORRECT ANSWER Accounting
standards developed and applied by professional accountants.
Exam UPDATED ACTUAL QUESTIONS
AND CORRECT ANSWERS
Eight steps of the accounting cycle 1 - CORRECT ANSWER accounting cycle: Analyze
transactions by examining source documents 1.
Accounts Payable - CORRECT ANSWER Amounts a business must pay in the future.
Accounts Receivable - CORRECT ANSWER Claims for future collection from customers.
Assets - CORRECT ANSWER Property owned by a business.
Balance Sheet - CORRECT ANSWER A formal report of a business' financial condition on a
certain date; reports the assets, liabilities, and owner's equity of the business.
Break Even - CORRECT ANSWER A point at which revenue equals expenses.
Business Transactions - CORRECT ANSWER A financial event that changes the resources of
a firm.
Capital - CORRECT ANSWER Financial investment in a business; equity.
Equity - CORRECT ANSWER An owner's financial interest in a business.
Expense - CORRECT ANSWER An outflow of cash, use of other assets, or incurring of a
liability.
Fair Market Value - CORRECT ANSWER The current worth of an asset or the price the asset
would bring if sold on the open market.
,Fundamental Accounting Equation - CORRECT ANSWER The relationship between assets
and liabilities plus the owner's equity.
Income Statement - CORRECT ANSWER A formal report of business operations covering a
specific period of time; also called a profit and loss statement or a statement of income and expenses.
Liabilities - CORRECT ANSWER Debts or obligations of a business.
Net Income - CORRECT ANSWER The result of an excess of revenue over expenses.
Net Loss - CORRECT ANSWER The result of an excess of expenses over revenue.
On Account - CORRECT ANSWER An arrangement to allow payment at a later date; also
called a charge account or open-account credit.
Owner's Equity - CORRECT ANSWER The financial interest of the owner of a business; also
called proprietorship or net worth.
Revenue - CORRECT ANSWER An inflow of money or other assets that results from the sales
of goods or services or from the use of money or property; also called income.
Statement of Owner's Equity - CORRECT ANSWER A formal report of changes that occurred
in the owner's financial interest during a reporting period.
Withdrawals - CORRECT ANSWER Funds taken from the business by the owner for personal
use.
Accounting - CORRECT ANSWER The process by which financial information about a
business is recorded, classified, summarized, interpreted, and communicated to owners, managers,
and other interested parties.
Accounting System - CORRECT ANSWER A process designed to accumulate, classify, and
summarize financial data.
, Auditing - CORRECT ANSWER The review of financial statements to assess their fairness
and adherence to generally accepted accounting principles.
Auditor's Report - CORRECT ANSWER An independent accountant's review of a firm's
financial statements.
Certified Public Accountant (CPA) - CORRECT ANSWER An independent accountant who
provides accounting services to the public for a fee.
Corporation - CORRECT ANSWER A publicly or privately owned business entity that is
separate from its owners and has a legal right to own property and do business in its own name;
stockholders are not responsible for the debts or taxes of the business.
Creditor - CORRECT ANSWER One to whom money is owned.
Discussion Memorandum - CORRECT ANSWER An explanation of a topic under
consideration by the Financial Accounting Standards Board.
Economic Entity - CORRECT ANSWER A business or organization whose major purpose is to
produce a profit for its owners.
Entity - CORRECT ANSWER Anything having its own separate identity, such as an
individual, a town, a university, or a business.
Exposure Draft - CORRECT ANSWER A proposed solution to a problem being considered by
the Financial Accounting Standards Board.
Financial Statements - CORRECT ANSWER Periodic Reports of a firm's financial position or
operating results.
Generally Accepted Accounting Principles (GAAP) - CORRECT ANSWER Accounting
standards developed and applied by professional accountants.
