WGU D196 – Principles of Financial and
Managerial Accounting Exam Final Exam
Prep (Latest Update )
Questions and Verified Answers | 100%
Correct | Grade A.
1. Which financial statement reports a company’s assets, liabilities,
and equity at a specific point in time?
A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
Rationale: The balance sheet presents a company’s financial position at
a specific date. It follows the accounting equation, Assets = Liabilities +
Equity, and shows what the company owns, what it owes, and the
owners’ residual interest.
2. A company purchases $5,000 of equipment for cash. What is the
immediate effect of this transaction on the accounting equation?
A. Assets increase by $5,000 and liabilities increase by $5,000
B. Assets increase by $5,000 and equity increases by $5,000
C. Assets decrease by $5,000 and liabilities decrease by $5,000
,D. One asset increases by $5,000 while another asset decreases by
$5,000
Rationale: Equipment increases by $5,000, while cash decreases by
$5,000. Both accounts are assets, so total assets and the overall
accounting equation remain unchanged.
3. Under accrual accounting, when should revenue generally be
recognized?
A. When cash is collected
B. When an invoice is printed
C. When the revenue is earned
D. When management approves the transaction
Rationale: Accrual accounting recognizes revenue when it is earned,
regardless of when cash is received. This follows the revenue recognition
principle and provides a more accurate representation of economic
activity.
4. Which account normally has a debit balance?
A. Accounts payable
B. Common stock
C. Service revenue
D. Accounts receivable
Rationale: Assets normally carry debit balances. Accounts receivable is
an asset representing amounts owed to the company by customers, so
its normal balance is a debit.
,5. A company receives $12,000 cash from a customer before providing
the contracted services. How should the company initially record the
transaction?
A. Debit Cash and credit Revenue
B. Debit Accounts Receivable and credit Revenue
C. Debit Cash and credit Unearned Revenue
D. Debit Unearned Revenue and credit Cash
Rationale: The company has received cash but has not yet earned the
revenue. Therefore, cash increases and a liability called unearned
revenue increases. Revenue is recognized when the company performs
the required services.
6. Which financial statement primarily measures revenues and
expenses over a period of time?
A. Balance sheet
B. Statement of cash flows
C. Statement of stockholders’ equity
D. Income statement
Rationale: The income statement summarizes revenues, expenses,
gains, and losses for a specified period. Its primary purpose is to
determine whether the company generated net income or a net loss.
7. A company has total assets of $250,000 and total liabilities of
$90,000. What is total equity?
, A. $160,000
B. $340,000
C. $90,000
D. $160,000
Rationale: The accounting equation is Assets = Liabilities + Equity.
Therefore, Equity = Assets − Liabilities = $250,000 − $90,000 = $160,000.
8. Which accounting principle requires expenses to be recognized in
the same period as the revenues they help generate?
A. Going concern principle
B. Historical cost principle
C. Revenue recognition principle
D. Matching principle
Rationale: The matching principle requires expenses to be recognized in
the period in which the related revenues are recognized. This helps
ensure that reported net income accurately reflects the economic
performance of the period.
9. Which of the following is an example of a current liability?
A. Land
B. Equipment
C. Retained earnings
D. Accounts payable
Managerial Accounting Exam Final Exam
Prep (Latest Update )
Questions and Verified Answers | 100%
Correct | Grade A.
1. Which financial statement reports a company’s assets, liabilities,
and equity at a specific point in time?
A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
Rationale: The balance sheet presents a company’s financial position at
a specific date. It follows the accounting equation, Assets = Liabilities +
Equity, and shows what the company owns, what it owes, and the
owners’ residual interest.
2. A company purchases $5,000 of equipment for cash. What is the
immediate effect of this transaction on the accounting equation?
A. Assets increase by $5,000 and liabilities increase by $5,000
B. Assets increase by $5,000 and equity increases by $5,000
C. Assets decrease by $5,000 and liabilities decrease by $5,000
,D. One asset increases by $5,000 while another asset decreases by
$5,000
Rationale: Equipment increases by $5,000, while cash decreases by
$5,000. Both accounts are assets, so total assets and the overall
accounting equation remain unchanged.
3. Under accrual accounting, when should revenue generally be
recognized?
A. When cash is collected
B. When an invoice is printed
C. When the revenue is earned
D. When management approves the transaction
Rationale: Accrual accounting recognizes revenue when it is earned,
regardless of when cash is received. This follows the revenue recognition
principle and provides a more accurate representation of economic
activity.
4. Which account normally has a debit balance?
A. Accounts payable
B. Common stock
C. Service revenue
D. Accounts receivable
Rationale: Assets normally carry debit balances. Accounts receivable is
an asset representing amounts owed to the company by customers, so
its normal balance is a debit.
,5. A company receives $12,000 cash from a customer before providing
the contracted services. How should the company initially record the
transaction?
A. Debit Cash and credit Revenue
B. Debit Accounts Receivable and credit Revenue
C. Debit Cash and credit Unearned Revenue
D. Debit Unearned Revenue and credit Cash
Rationale: The company has received cash but has not yet earned the
revenue. Therefore, cash increases and a liability called unearned
revenue increases. Revenue is recognized when the company performs
the required services.
6. Which financial statement primarily measures revenues and
expenses over a period of time?
A. Balance sheet
B. Statement of cash flows
C. Statement of stockholders’ equity
D. Income statement
Rationale: The income statement summarizes revenues, expenses,
gains, and losses for a specified period. Its primary purpose is to
determine whether the company generated net income or a net loss.
7. A company has total assets of $250,000 and total liabilities of
$90,000. What is total equity?
, A. $160,000
B. $340,000
C. $90,000
D. $160,000
Rationale: The accounting equation is Assets = Liabilities + Equity.
Therefore, Equity = Assets − Liabilities = $250,000 − $90,000 = $160,000.
8. Which accounting principle requires expenses to be recognized in
the same period as the revenues they help generate?
A. Going concern principle
B. Historical cost principle
C. Revenue recognition principle
D. Matching principle
Rationale: The matching principle requires expenses to be recognized in
the period in which the related revenues are recognized. This helps
ensure that reported net income accurately reflects the economic
performance of the period.
9. Which of the following is an example of a current liability?
A. Land
B. Equipment
C. Retained earnings
D. Accounts payable
