WGU D102 FINANCIAL ACCOUNTING 64
EXAM REVIEW STUDY NOTES
◉ Which financial statements cover a period of time?
Answer: Income statement, statement of equity, and statement of
cash flows.
◉ What is net income?
Answer: Revenue minus expenses.
◉ What is accrual accounting?
Answer: Revenue is recognized when earned and expenses when
incurred, regardless of when cash changes hands.
◉ What is cash-basis accounting?
Answer: Revenue and expenses are generally recognized when cash
is received or paid.
◉ Which accounting basis is required for most GAAP financial
reporting?
Answer: Accrual basis.
, ◉ What is the revenue recognition principle?
Answer: Revenue is recognized when it is earned.
◉ What is the expense recognition principle?
Answer: Expenses are recognized in the period in which they help
generate revenue or when they are incurred.
◉ Why are adjusting entries needed?
Answer: To ensure revenues and expenses are recorded in the
correct accounting period.
◉ What is an adjusting entry?
Answer: An entry made at the end of an accounting period to update
accounts before financial statements are prepared.
◉ What are the major types of adjusting entries?
Answer: Accrued revenues, accrued expenses, deferred revenues,
prepaid expenses, and depreciation.
◉ What is an accrued expense?
Answer: An expense that has been incurred but has not yet been
paid or recorded.
EXAM REVIEW STUDY NOTES
◉ Which financial statements cover a period of time?
Answer: Income statement, statement of equity, and statement of
cash flows.
◉ What is net income?
Answer: Revenue minus expenses.
◉ What is accrual accounting?
Answer: Revenue is recognized when earned and expenses when
incurred, regardless of when cash changes hands.
◉ What is cash-basis accounting?
Answer: Revenue and expenses are generally recognized when cash
is received or paid.
◉ Which accounting basis is required for most GAAP financial
reporting?
Answer: Accrual basis.
, ◉ What is the revenue recognition principle?
Answer: Revenue is recognized when it is earned.
◉ What is the expense recognition principle?
Answer: Expenses are recognized in the period in which they help
generate revenue or when they are incurred.
◉ Why are adjusting entries needed?
Answer: To ensure revenues and expenses are recorded in the
correct accounting period.
◉ What is an adjusting entry?
Answer: An entry made at the end of an accounting period to update
accounts before financial statements are prepared.
◉ What are the major types of adjusting entries?
Answer: Accrued revenues, accrued expenses, deferred revenues,
prepaid expenses, and depreciation.
◉ What is an accrued expense?
Answer: An expense that has been incurred but has not yet been
paid or recorded.
