Wall Street Prep (Accounting) | Questions with 100%
Verified Answers | Latest Update 2026/2027
Question: The Accounting Equation
Answer: Assets = Liabilities + Owner's Equity
Question: Assets
Answer: Anything a company owns with quantifiable
value
Question: Liabilities
Answer: Money a company owes to a debtor, such as
outstanding payroll expenses, debt payments, rent and
utilities, bonds payable, and taxes
Question: Owner's Equity
Answer: The net worth of a company, or the
amount that would be left if all assets were sold and all
liabilities paid; this money belongs to shareholders, who
may be private owners or public investors
Question: Accounting's Focus
Answer: accounting provides
a snapshot of an organization's financial situation using past
and present transactional data,
Question: Finance's Focus
Answer: finance is inherently forwardlooking—all value comes from the future.
Question: What should the accounting balance always do
Answer: the assets on the left should equal the claims against those assets onthe other side.
It's a
fundamental means for determining
whether a company's financial records accurately reflect the transactions carried out over
a period.
Question: Assessing Performance in the lens of Finance
Answer: finance looks at how effectively an organization generates and uses cash through the
use
of several
measurements.
Question: Assessing Performance in the lens of accounting
Answer: accounting's reliance on transactional
data
,Question: Free Cash Flow
Answer: Arguably the most important one, which
examines how much money a company has to distribute to
investors, or reinvest, after all expenses have been covered.
It's a strong indicator of profitability and can be used to make
present-day investment decisions based on an expectation of
future payoff.
Question: How Accounting Measures Financial Performance
Answer: The accrual method of accounting, followed by most organizations, records
transactions
as they're agreed upon, as
opposed to when they're completed. It allows for transactions to be made with credit or
deferred payments and operates under the idea that revenues and costs will smooth out
over time to more accurately depict economic reality. This makes it possible to compare
year-over-year growth of a company's revenues, costs, and profits without factoring in
one-off events or seasonal and cyclical changes.
Question: How Finances measures Financial Performance
Answer: Finance rejects that idea, believing that the best way to measure economic returns is
to
calculate the cash a company can produce and leverage, which depends on when that
cash is exchanged, rather than just agreed upon.
Question: How Accounting Assesses Value
Answer: In accounting, a conservatism principle is often applied, which suggests that
companies
should record lower projected values of their assets and higher estimates
of their liabilities. Under this doctrine, if you don't know the value of something precisely,
you count it as zero. Doing so helps businesses avoid overextending themselves by
underestimating the value of assets and overestimating the liabilities.
Question: How Finance Assesses Value
Answer: in finance, which employs an analytical process, known as valuation, to determine the
worth of a company, project, or asset. The gold standard is discounting, which is applied
to a series of cash flows over a period of time. The discount rate, represented as a
percentage, accounts for opportunity cost, inflation, and risk,
and brings the value of a future stream of cash to its present value.
Question: Discounting (Finance)
Answer: which is applied to a series of cash flows over a period of time.
Question: Discount Rate
Answer: represented as a percentage, accounts for opportunity cost, inflation, and risk,and
brings
the value of a future stream of cash to its present value.
,Question: The Balance Sheet
Answer: A balance sheet is a financial document designed to communicate exactly how much
a
company or organization is worth—its "book value." It achieves this by listing and tallying
all of a company's assets, liabilities, and owners' equity as of a particular reporting date.
Typically, a balance sheet is prepared and distributed on a quarterly or monthly basis,
depending on the frequency of reporting as determined by law or company policy.
Question: Purpose of a Balance Sheet
Answer: When a balance sheet is reviewed internally, it's designed to give insight into whether
a
company is succeeding or failing. Based on this information, policies and approaches can
be shifted: doubling down on successes, correcting failures, and pivoting toward new
opportunities. When a balance sheet is reviewed externally, it's designed to give insight
into the resources available to a business and how they were financed. Based on this
information, potential investors can decide whether it would be wise to invest.
External auditors might also use a balance sheet to ensure a company is complying with
any reporting laws it's subject to
Question: Whats important to remember about a balance sheet
Answer: It's important to remember that a balance sheet communicates
information as of a specific date. By its very nature, a balance sheet is always based on
past data. While investors and stakeholders may use a balance sheet to predict future
performance, past performance is no guarantee of future
results.
Question: Contents of Balance Sheet
Answer: Assets = Liabilities + Owners' Equity.
Question: Owner's Equity
Answer: ASSETS - LIABILITIES
Question: Liabilities
Answer: ASSETS - OWNERS' EQUITY
Question: Asset
Answer: anything owned by a company that holds inherent,
quantifiable value
Question: liquidation
Answer: business could, if necessary, convert
an asset into cash
Question: Current Assets
Answer: company expects it will convert into cash within a year
, Question: Non-current assets
Answer: include long-term investments that
aren't expected to convert into cash in the short term
Question: Cash and Cash Equivalents (Current)
Answer: Actual money or near-money
Examples:
Cash in bank account
Short-term treasury bills
Money market funds
Question: Inventory (Current)
Answer: What it is:
Products the company plans to sell
Examples:
Nike → shoes sitting in a warehouse
Apple → iPhones not yet sold
Not cash yet, but will become cash when sold
Question: Marketable Securities (Current)
Answer: Short-term investments that can be quickly sold
Examples:
Stocks
Bonds
Think: "Investments we can liquidate quickly"
Question: Accounts Receivable (Current)
Answer: Money customers owe the company
Examples:
A business sells $10,000 worth of products on credit
Customer hasn't paid yet
It's "future cash"
Question: Prepaid Expenses (Current)
Answer: Money already paid for something you'll use later
Examples:
Paying rent for the next 6 months upfront
Paying insurance in advance
You already paid, but haven't used it yet
Question: Land (Non-Current)
Answer: Property owned by the company
Examples:
Walmart land for stores
Factory land
Usually held long-term
Verified Answers | Latest Update 2026/2027
Question: The Accounting Equation
Answer: Assets = Liabilities + Owner's Equity
Question: Assets
Answer: Anything a company owns with quantifiable
value
Question: Liabilities
Answer: Money a company owes to a debtor, such as
outstanding payroll expenses, debt payments, rent and
utilities, bonds payable, and taxes
Question: Owner's Equity
Answer: The net worth of a company, or the
amount that would be left if all assets were sold and all
liabilities paid; this money belongs to shareholders, who
may be private owners or public investors
Question: Accounting's Focus
Answer: accounting provides
a snapshot of an organization's financial situation using past
and present transactional data,
Question: Finance's Focus
Answer: finance is inherently forwardlooking—all value comes from the future.
Question: What should the accounting balance always do
Answer: the assets on the left should equal the claims against those assets onthe other side.
It's a
fundamental means for determining
whether a company's financial records accurately reflect the transactions carried out over
a period.
Question: Assessing Performance in the lens of Finance
Answer: finance looks at how effectively an organization generates and uses cash through the
use
of several
measurements.
Question: Assessing Performance in the lens of accounting
Answer: accounting's reliance on transactional
data
,Question: Free Cash Flow
Answer: Arguably the most important one, which
examines how much money a company has to distribute to
investors, or reinvest, after all expenses have been covered.
It's a strong indicator of profitability and can be used to make
present-day investment decisions based on an expectation of
future payoff.
Question: How Accounting Measures Financial Performance
Answer: The accrual method of accounting, followed by most organizations, records
transactions
as they're agreed upon, as
opposed to when they're completed. It allows for transactions to be made with credit or
deferred payments and operates under the idea that revenues and costs will smooth out
over time to more accurately depict economic reality. This makes it possible to compare
year-over-year growth of a company's revenues, costs, and profits without factoring in
one-off events or seasonal and cyclical changes.
Question: How Finances measures Financial Performance
Answer: Finance rejects that idea, believing that the best way to measure economic returns is
to
calculate the cash a company can produce and leverage, which depends on when that
cash is exchanged, rather than just agreed upon.
Question: How Accounting Assesses Value
Answer: In accounting, a conservatism principle is often applied, which suggests that
companies
should record lower projected values of their assets and higher estimates
of their liabilities. Under this doctrine, if you don't know the value of something precisely,
you count it as zero. Doing so helps businesses avoid overextending themselves by
underestimating the value of assets and overestimating the liabilities.
Question: How Finance Assesses Value
Answer: in finance, which employs an analytical process, known as valuation, to determine the
worth of a company, project, or asset. The gold standard is discounting, which is applied
to a series of cash flows over a period of time. The discount rate, represented as a
percentage, accounts for opportunity cost, inflation, and risk,
and brings the value of a future stream of cash to its present value.
Question: Discounting (Finance)
Answer: which is applied to a series of cash flows over a period of time.
Question: Discount Rate
Answer: represented as a percentage, accounts for opportunity cost, inflation, and risk,and
brings
the value of a future stream of cash to its present value.
,Question: The Balance Sheet
Answer: A balance sheet is a financial document designed to communicate exactly how much
a
company or organization is worth—its "book value." It achieves this by listing and tallying
all of a company's assets, liabilities, and owners' equity as of a particular reporting date.
Typically, a balance sheet is prepared and distributed on a quarterly or monthly basis,
depending on the frequency of reporting as determined by law or company policy.
Question: Purpose of a Balance Sheet
Answer: When a balance sheet is reviewed internally, it's designed to give insight into whether
a
company is succeeding or failing. Based on this information, policies and approaches can
be shifted: doubling down on successes, correcting failures, and pivoting toward new
opportunities. When a balance sheet is reviewed externally, it's designed to give insight
into the resources available to a business and how they were financed. Based on this
information, potential investors can decide whether it would be wise to invest.
External auditors might also use a balance sheet to ensure a company is complying with
any reporting laws it's subject to
Question: Whats important to remember about a balance sheet
Answer: It's important to remember that a balance sheet communicates
information as of a specific date. By its very nature, a balance sheet is always based on
past data. While investors and stakeholders may use a balance sheet to predict future
performance, past performance is no guarantee of future
results.
Question: Contents of Balance Sheet
Answer: Assets = Liabilities + Owners' Equity.
Question: Owner's Equity
Answer: ASSETS - LIABILITIES
Question: Liabilities
Answer: ASSETS - OWNERS' EQUITY
Question: Asset
Answer: anything owned by a company that holds inherent,
quantifiable value
Question: liquidation
Answer: business could, if necessary, convert
an asset into cash
Question: Current Assets
Answer: company expects it will convert into cash within a year
, Question: Non-current assets
Answer: include long-term investments that
aren't expected to convert into cash in the short term
Question: Cash and Cash Equivalents (Current)
Answer: Actual money or near-money
Examples:
Cash in bank account
Short-term treasury bills
Money market funds
Question: Inventory (Current)
Answer: What it is:
Products the company plans to sell
Examples:
Nike → shoes sitting in a warehouse
Apple → iPhones not yet sold
Not cash yet, but will become cash when sold
Question: Marketable Securities (Current)
Answer: Short-term investments that can be quickly sold
Examples:
Stocks
Bonds
Think: "Investments we can liquidate quickly"
Question: Accounts Receivable (Current)
Answer: Money customers owe the company
Examples:
A business sells $10,000 worth of products on credit
Customer hasn't paid yet
It's "future cash"
Question: Prepaid Expenses (Current)
Answer: Money already paid for something you'll use later
Examples:
Paying rent for the next 6 months upfront
Paying insurance in advance
You already paid, but haven't used it yet
Question: Land (Non-Current)
Answer: Property owned by the company
Examples:
Walmart land for stores
Factory land
Usually held long-term
