WGU D774 – Introduction to Business Accounting Objective
Assessment (OA) Exam| Complete Exam Questions with Verified
Correct Answers and Detailed Rationales – Latest Update
2026/2027 | Graded A+
Question 1
A company purchases office equipment for $15,000 cash. How should this
transaction be recorded in the accounting equation?
A. Increase assets by $15,000 and decrease liabilities by $15,000 because cash
was used to purchase equipment.
B. Increase one asset account (equipment) by $15,000 and decrease another
asset account (cash) by $15,000, leaving total assets unchanged.
C. Increase liabilities by $15,000 and increase owner's equity by $15,000
because equipment increases company value.
D. Decrease assets by $15,000 and increase expenses by $15,000 because all
purchases are recorded as expenses.
Correct Answer: B. Increase one asset account (equipment) by $15,000
and decrease another asset account (cash) by $15,000, leaving total
assets unchanged.
Rationale:
The accounting equation is Assets = Liabilities + Equity. Purchasing
equipment with cash exchanges one asset for another, so total assets remain
the same.
Question 2
Which financial statement reports a company's revenues, expenses, and net
income over a specific period?
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,A. Balance sheet, which reports assets, liabilities, and equity at a specific point
in time.
B. Income statement, which summarizes revenues earned and expenses
incurred to determine profitability during a reporting period.
C. Statement of cash flows, which reports cash inflows and outflows from
operating, investing, and financing activities.
D. Statement of owner's equity, which explains changes in ownership interest
during an accounting period.
Correct Answer: B. Income statement, which summarizes revenues
earned and expenses incurred to determine profitability during a
reporting period.
Rationale:
The income statement measures financial performance by showing whether a
company earned a profit or loss.
Question 3
Which accounting principle requires companies to record transactions when
they occur rather than only when cash is received or paid?
A. Accrual basis accounting, which recognizes revenues when earned and
expenses when incurred regardless of when cash changes hands.
B. Cash basis accounting, which records transactions only when actual cash
payments or receipts occur.
C. Matching principle, which requires businesses to report only cash-related
transactions.
D. Conservatism principle, which requires companies to avoid recording all
revenues.
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,Correct Answer: A. Accrual basis accounting, which recognizes revenues
when earned and expenses when incurred regardless of when cash
changes hands.
Rationale:
Accrual accounting provides a more accurate picture of financial performance
by recording economic events when they happen.
Question 4
A company provides services to a customer in December but receives
payment in January. Under accrual accounting, when should the revenue be
recorded?
A. January, because that is when cash was received from the customer.
B. December, because revenue is recognized when it is earned regardless of
when payment occurs.
C. The following year, because all revenue must wait until cash is collected.
D. Only when management approves the transaction.
Correct Answer: B. December, because revenue is recognized when it is
earned regardless of when payment occurs.
Rationale:
The revenue recognition principle requires companies to record revenue
when services are provided.
Question 5
Which account classification includes cash, accounts receivable, inventory,
and equipment?
A. Assets, which represent economic resources owned or controlled by a
business.
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, B. Liabilities, which represent obligations owed to external parties.
C. Equity, which represents the owner's residual interest in business assets.
D. Expenses, which represent costs incurred during operations.
Correct Answer: A. Assets, which represent economic resources owned
or controlled by a business.
Rationale:
Assets provide future economic benefits and include resources such as cash,
inventory, and equipment.
Question 6
A company owes $20,000 to a supplier for inventory purchased on credit.
Which account is affected?
A. Accounts payable, which represents amounts owed to suppliers and is
classified as a liability.
B. Accounts receivable, which represents money owed by customers.
C. Revenue, which represents income earned from selling products.
D. Expense, which represents costs already paid.
Correct Answer: A. Accounts payable, which represents amounts owed to
suppliers and is classified as a liability.
Rationale:
Accounts payable represents short-term obligations owed to creditors.
Question 7
What is the primary purpose of the accounting equation?
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Assessment (OA) Exam| Complete Exam Questions with Verified
Correct Answers and Detailed Rationales – Latest Update
2026/2027 | Graded A+
Question 1
A company purchases office equipment for $15,000 cash. How should this
transaction be recorded in the accounting equation?
A. Increase assets by $15,000 and decrease liabilities by $15,000 because cash
was used to purchase equipment.
B. Increase one asset account (equipment) by $15,000 and decrease another
asset account (cash) by $15,000, leaving total assets unchanged.
C. Increase liabilities by $15,000 and increase owner's equity by $15,000
because equipment increases company value.
D. Decrease assets by $15,000 and increase expenses by $15,000 because all
purchases are recorded as expenses.
Correct Answer: B. Increase one asset account (equipment) by $15,000
and decrease another asset account (cash) by $15,000, leaving total
assets unchanged.
Rationale:
The accounting equation is Assets = Liabilities + Equity. Purchasing
equipment with cash exchanges one asset for another, so total assets remain
the same.
Question 2
Which financial statement reports a company's revenues, expenses, and net
income over a specific period?
1|Page
,A. Balance sheet, which reports assets, liabilities, and equity at a specific point
in time.
B. Income statement, which summarizes revenues earned and expenses
incurred to determine profitability during a reporting period.
C. Statement of cash flows, which reports cash inflows and outflows from
operating, investing, and financing activities.
D. Statement of owner's equity, which explains changes in ownership interest
during an accounting period.
Correct Answer: B. Income statement, which summarizes revenues
earned and expenses incurred to determine profitability during a
reporting period.
Rationale:
The income statement measures financial performance by showing whether a
company earned a profit or loss.
Question 3
Which accounting principle requires companies to record transactions when
they occur rather than only when cash is received or paid?
A. Accrual basis accounting, which recognizes revenues when earned and
expenses when incurred regardless of when cash changes hands.
B. Cash basis accounting, which records transactions only when actual cash
payments or receipts occur.
C. Matching principle, which requires businesses to report only cash-related
transactions.
D. Conservatism principle, which requires companies to avoid recording all
revenues.
2|Page
,Correct Answer: A. Accrual basis accounting, which recognizes revenues
when earned and expenses when incurred regardless of when cash
changes hands.
Rationale:
Accrual accounting provides a more accurate picture of financial performance
by recording economic events when they happen.
Question 4
A company provides services to a customer in December but receives
payment in January. Under accrual accounting, when should the revenue be
recorded?
A. January, because that is when cash was received from the customer.
B. December, because revenue is recognized when it is earned regardless of
when payment occurs.
C. The following year, because all revenue must wait until cash is collected.
D. Only when management approves the transaction.
Correct Answer: B. December, because revenue is recognized when it is
earned regardless of when payment occurs.
Rationale:
The revenue recognition principle requires companies to record revenue
when services are provided.
Question 5
Which account classification includes cash, accounts receivable, inventory,
and equipment?
A. Assets, which represent economic resources owned or controlled by a
business.
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, B. Liabilities, which represent obligations owed to external parties.
C. Equity, which represents the owner's residual interest in business assets.
D. Expenses, which represent costs incurred during operations.
Correct Answer: A. Assets, which represent economic resources owned
or controlled by a business.
Rationale:
Assets provide future economic benefits and include resources such as cash,
inventory, and equipment.
Question 6
A company owes $20,000 to a supplier for inventory purchased on credit.
Which account is affected?
A. Accounts payable, which represents amounts owed to suppliers and is
classified as a liability.
B. Accounts receivable, which represents money owed by customers.
C. Revenue, which represents income earned from selling products.
D. Expense, which represents costs already paid.
Correct Answer: A. Accounts payable, which represents amounts owed to
suppliers and is classified as a liability.
Rationale:
Accounts payable represents short-term obligations owed to creditors.
Question 7
What is the primary purpose of the accounting equation?
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