WGU D102 FINANCIAL ACCOUNTING
COMPREHENSIVE EXAM STUDY GUIDE
QUESTIONS AND ANSWERS 100%
VERIFIED 2026/2027
1. A company performs services for a client on account. Which of the following describes the
effect on the accounting equation?
A. Assets increase and Liabilities increase
B. Assets decrease and Equity increases
C. Assets increase and Equity increases
D. Liabilities decrease and Equity increases
Answer: C
Conceptual Explanation: Performing services on account increases Accounts Receivable
(an asset) and Service Revenue, which increases Retained Earnings (equity).
2. Under the accrual basis of accounting, when is revenue recognized?
A. When cash is received from the customer
B. At the end of the fiscal year
C. When the performance obligation is satisfied
D. When the contract is signed
,Answer: C
Conceptual Explanation: Accrual accounting recognizes revenue when it is earned,
regardless of when cash is received.
3. Which financial statement is prepared first in the accounting cycle?
A. Balance Sheet
B. Statement of Cash Flows
C. Income Statement
D. Statement of Retained Earnings
Answer: C
Conceptual Explanation: The Income Statement is prepared first to determine Net
Income, which is then used in the Statement of Retained Earnings.
4. What is the normal balance of the ‘Accumulated Depreciation’ account?
A. Debit
B. It depends on the asset type
C. Credit
D. Zero
Answer: C
, Conceptual Explanation: Accumulated Depreciation is a contra-asset account; since assets
have a normal debit balance, contra-assets have a normal credit balance.
5. A company pays $12,000 for a one-year insurance policy on October 1. What is the
adjusting entry on December 31?
A. Debit Insurance Expense $3,000; Credit Prepaid Insurance $3,000
B. Debit Prepaid Insurance $9,000; Credit Insurance Expense $9,000
C. Debit Insurance Expense $1,000; Credit Cash $1,000
D. Debit Insurance Expense $12,000; Credit Prepaid Insurance $12,000
Answer: A
Conceptual Explanation: The monthly cost is $1,000 ($12,000/12). From Oct 1 to Dec 31
is 3 months, so $3,000 is expensed.
6. Which of the following accounts is NOT closed at the end of the accounting period?
A. Service Revenue
B. Dividends
C. Unearned Revenue
D. Salaries Expense
Answer: C
Conceptual Explanation: Unearned Revenue is a liability (permanent account).
Temporary accounts (revenues, expenses, dividends) are closed.
COMPREHENSIVE EXAM STUDY GUIDE
QUESTIONS AND ANSWERS 100%
VERIFIED 2026/2027
1. A company performs services for a client on account. Which of the following describes the
effect on the accounting equation?
A. Assets increase and Liabilities increase
B. Assets decrease and Equity increases
C. Assets increase and Equity increases
D. Liabilities decrease and Equity increases
Answer: C
Conceptual Explanation: Performing services on account increases Accounts Receivable
(an asset) and Service Revenue, which increases Retained Earnings (equity).
2. Under the accrual basis of accounting, when is revenue recognized?
A. When cash is received from the customer
B. At the end of the fiscal year
C. When the performance obligation is satisfied
D. When the contract is signed
,Answer: C
Conceptual Explanation: Accrual accounting recognizes revenue when it is earned,
regardless of when cash is received.
3. Which financial statement is prepared first in the accounting cycle?
A. Balance Sheet
B. Statement of Cash Flows
C. Income Statement
D. Statement of Retained Earnings
Answer: C
Conceptual Explanation: The Income Statement is prepared first to determine Net
Income, which is then used in the Statement of Retained Earnings.
4. What is the normal balance of the ‘Accumulated Depreciation’ account?
A. Debit
B. It depends on the asset type
C. Credit
D. Zero
Answer: C
, Conceptual Explanation: Accumulated Depreciation is a contra-asset account; since assets
have a normal debit balance, contra-assets have a normal credit balance.
5. A company pays $12,000 for a one-year insurance policy on October 1. What is the
adjusting entry on December 31?
A. Debit Insurance Expense $3,000; Credit Prepaid Insurance $3,000
B. Debit Prepaid Insurance $9,000; Credit Insurance Expense $9,000
C. Debit Insurance Expense $1,000; Credit Cash $1,000
D. Debit Insurance Expense $12,000; Credit Prepaid Insurance $12,000
Answer: A
Conceptual Explanation: The monthly cost is $1,000 ($12,000/12). From Oct 1 to Dec 31
is 3 months, so $3,000 is expensed.
6. Which of the following accounts is NOT closed at the end of the accounting period?
A. Service Revenue
B. Dividends
C. Unearned Revenue
D. Salaries Expense
Answer: C
Conceptual Explanation: Unearned Revenue is a liability (permanent account).
Temporary accounts (revenues, expenses, dividends) are closed.
