WGU D774 PreAssessment | Latest Update 2026/2027
| 200 Questions and Verified Answers | Objective
Assessment Study Guide | A+ Graded
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. Assets = Owner's Equity Liabilities
Answer: B
Rationale: The accounting equation is Assets = Liabilities + Owner's Equity. This equation must always
balance and forms the foundation of doubleentry accounting.
2. Which of the following is an asset?
A. Accounts Payable
B. Notes Payable
C. Accounts Receivable
D. Owner's Capital
Answer: C
Rationale: Accounts Receivable is an asset because it represents money owed to the business by
customers. Accounts Payable and Notes Payable are liabilities, and Owner's Capital is equity.
3. A liability is best defined as:
,A. Resources owned by the business
B. An owner's claim on business assets
C. A present obligation of the entity
D. The excess of assets over liabilities
Answer: C
Rationale: A liability is a present obligation of the entity arising from past events, the settlement of
which is expected to result in an outflow of resources.
4. Owner's equity represents:
A. The claims of creditors against the business
B. The owner's claim on the assets of the business
C. The total assets of the business
D. The total liabilities of the business
Answer: B
Rationale: Owner's equity represents the owner's residual claim on the assets of the business after
deducting liabilities. It is the owner's stake in the company.
5. Which of the following transactions would increase both assets and liabilities?
A. Purchasing equipment with cash
B. Borrowing money from a bank
C. Paying off a loan
D. Providing services for cash
,Answer: B
Rationale: Borrowing money from a bank increases assets (cash) and liabilities (loan payable).
Purchasing equipment with cash is an exchange of assets. Paying off a loan decreases assets and
liabilities. Providing services for cash increases assets and equity.
6. The accounting equation must balance after every transaction.
A. True
B. False
Answer: A
Rationale: The accounting equation (Assets = Liabilities + Owner's Equity) must always balance after
each transaction. This is a fundamental principle of doubleentry accounting.
7. Which financial statement reports a company's financial position at a specific point in time?
A. Income Statement
B. Statement of Cash Flows
C. Balance Sheet
D. Statement of Owner's Equity
Answer: C
Rationale: The Balance Sheet reports a company's financial position (assets, liabilities, and equity) at a
specific point in time. The Income Statement and Statement of Cash Flows cover a period of time.
8. The Income Statement reports:
, A. Assets, liabilities, and equity
B. Revenues and expenses over a period of time
C. Cash inflows and outflows
D. Changes in owner's equity
Answer: B
Rationale: The Income Statement reports revenues and expenses over a specific period, resulting in net
income or net loss.
9. Which financial statement shows how cash changed during a period?
A. Balance Sheet
B. Income Statement
C. Statement of Cash Flows
D. Statement of Owner's Equity
Answer: C
Rationale: The Statement of Cash Flows reports cash inflows and outflows from operating, investing, and
financing activities during a period.
10. Revenues are:
A. Increases in assets from selling goods or services
B. Costs incurred in operating the business
C. Claims by creditors
D. Owner's investments
| 200 Questions and Verified Answers | Objective
Assessment Study Guide | A+ Graded
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. Assets = Owner's Equity Liabilities
Answer: B
Rationale: The accounting equation is Assets = Liabilities + Owner's Equity. This equation must always
balance and forms the foundation of doubleentry accounting.
2. Which of the following is an asset?
A. Accounts Payable
B. Notes Payable
C. Accounts Receivable
D. Owner's Capital
Answer: C
Rationale: Accounts Receivable is an asset because it represents money owed to the business by
customers. Accounts Payable and Notes Payable are liabilities, and Owner's Capital is equity.
3. A liability is best defined as:
,A. Resources owned by the business
B. An owner's claim on business assets
C. A present obligation of the entity
D. The excess of assets over liabilities
Answer: C
Rationale: A liability is a present obligation of the entity arising from past events, the settlement of
which is expected to result in an outflow of resources.
4. Owner's equity represents:
A. The claims of creditors against the business
B. The owner's claim on the assets of the business
C. The total assets of the business
D. The total liabilities of the business
Answer: B
Rationale: Owner's equity represents the owner's residual claim on the assets of the business after
deducting liabilities. It is the owner's stake in the company.
5. Which of the following transactions would increase both assets and liabilities?
A. Purchasing equipment with cash
B. Borrowing money from a bank
C. Paying off a loan
D. Providing services for cash
,Answer: B
Rationale: Borrowing money from a bank increases assets (cash) and liabilities (loan payable).
Purchasing equipment with cash is an exchange of assets. Paying off a loan decreases assets and
liabilities. Providing services for cash increases assets and equity.
6. The accounting equation must balance after every transaction.
A. True
B. False
Answer: A
Rationale: The accounting equation (Assets = Liabilities + Owner's Equity) must always balance after
each transaction. This is a fundamental principle of doubleentry accounting.
7. Which financial statement reports a company's financial position at a specific point in time?
A. Income Statement
B. Statement of Cash Flows
C. Balance Sheet
D. Statement of Owner's Equity
Answer: C
Rationale: The Balance Sheet reports a company's financial position (assets, liabilities, and equity) at a
specific point in time. The Income Statement and Statement of Cash Flows cover a period of time.
8. The Income Statement reports:
, A. Assets, liabilities, and equity
B. Revenues and expenses over a period of time
C. Cash inflows and outflows
D. Changes in owner's equity
Answer: B
Rationale: The Income Statement reports revenues and expenses over a specific period, resulting in net
income or net loss.
9. Which financial statement shows how cash changed during a period?
A. Balance Sheet
B. Income Statement
C. Statement of Cash Flows
D. Statement of Owner's Equity
Answer: C
Rationale: The Statement of Cash Flows reports cash inflows and outflows from operating, investing, and
financing activities during a period.
10. Revenues are:
A. Increases in assets from selling goods or services
B. Costs incurred in operating the business
C. Claims by creditors
D. Owner's investments
