Pass WGU D196 OA 2026 | Principles of Financial and
Managerial Accounting Practice Test Bank
1. If a startup company is looking to expand its operations, which
combination of capital sources would be most beneficial for minimizing
financial risk?
Gross business earnings and investors
Investors and retained business earnings
Employees and creditors
Creditors and taxes
2. Describe the role of lenders in relation to financial information provided
by a company.
Lenders analyze financial data to make investment decisions.
Lenders use financial information to assess the company's
ability to repay loans.
Lenders evaluate market trends for business growth.
Lenders focus on employee performance metrics.
3. C and C borrowed $100,000 cash from a local bank. Which of the
following is true?
Assets increase and liabilities increase
Assets increase and liabilities decrease
Assets increase and equity increases
Assets decrease and liabilities increase
4. What do accountants do?
Tell a business owner how to spend their money
, Measure how much money is spent
Measure, record and report on an individual or business'
financial activities
Count pennies
5. Which of the following best describes an internal transaction in
accounting?
A company sells goods to a customer.
An employee purchases supplies from another company.
A company pays rent to its landlord.
An employee is transferred from one department to another.
6. During 2020, Lloyd Corp. borrowed $10,000 from a bank. How will this
transaction affect Lloyd's 2020 financial statements?
decrease cash, decrease loans payable
increase loans payable, increase interest expense
increase cash, decrease interest expense
decrease cash, decrease interest expense
increase cash, increase loans payable
7. Which of the following accounts is classified as an asset on a balance
sheet?
Retained earnings
Accounts payable
Unearned revenue
Accounts receivable
,8. You read in the newspaper that a local company you are familiar with
has been found guilty in court of publishing financial statements that are
false and misleading to users of those financial statements. In this
situation, what could the American Institute of Certified Public
Accountants (AICPA) do in response to the accountants who were
found guilty of unethical conduct in accounting practices?
Implement professional sanctions
Report the business to the FASB
Enforce legal punishments
Cover up the unethical conduct with flattering news reports
9. Why is it critical for companies to comply with tax laws in their
accounting practices?
Compliance with tax laws ensures that the company avoids
legal penalties and maintains its reputation.
Compliance with tax laws is only necessary for publicly traded
companies.
Compliance with tax laws allows companies to ignore ethical
standards.
Compliance with tax laws guarantees higher profits.
10. Describe the main difference between management accounting and
financial accounting in terms of their target audience.
Management accounting is aimed at internal users, while
financial accounting is aimed at external users.
Both management and financial accounting target internal users.
Management accounting and financial accounting serve the
same audience.
Financial accounting is focused on internal decision-making,
, while management accounting is for external reporting.
11. Which document is primarily used to summarize a company's financial
performance over a specific period?
Financial reports
Corporate budget
Cost analysis
Bank statements
12. Describe the significance of the SEC in the context of financial
reporting and investor protection.
The SEC plays a crucial role in ensuring that financial markets
operate fairly and transparently, which protects investors by
requiring companies to provide accurate financial information.
The SEC's main function is to establish accounting standards for
international use.
The SEC is primarily focused on enforcing income tax
compliance among businesses.
The SEC provides financial advice to investors on stock
purchases.
13. Describe the primary responsibilities of the IASB in the context of
accounting standards.
The IASB provides funding for accounting education programs.
The IASB enforces tax regulations for businesses.
The IASB is responsible for developing and issuing
International Financial Reporting Standards (IFRS) to ensure
transparency and consistency in financial reporting.
The IASB audits financial statements of companies worldwide.
Managerial Accounting Practice Test Bank
1. If a startup company is looking to expand its operations, which
combination of capital sources would be most beneficial for minimizing
financial risk?
Gross business earnings and investors
Investors and retained business earnings
Employees and creditors
Creditors and taxes
2. Describe the role of lenders in relation to financial information provided
by a company.
Lenders analyze financial data to make investment decisions.
Lenders use financial information to assess the company's
ability to repay loans.
Lenders evaluate market trends for business growth.
Lenders focus on employee performance metrics.
3. C and C borrowed $100,000 cash from a local bank. Which of the
following is true?
Assets increase and liabilities increase
Assets increase and liabilities decrease
Assets increase and equity increases
Assets decrease and liabilities increase
4. What do accountants do?
Tell a business owner how to spend their money
, Measure how much money is spent
Measure, record and report on an individual or business'
financial activities
Count pennies
5. Which of the following best describes an internal transaction in
accounting?
A company sells goods to a customer.
An employee purchases supplies from another company.
A company pays rent to its landlord.
An employee is transferred from one department to another.
6. During 2020, Lloyd Corp. borrowed $10,000 from a bank. How will this
transaction affect Lloyd's 2020 financial statements?
decrease cash, decrease loans payable
increase loans payable, increase interest expense
increase cash, decrease interest expense
decrease cash, decrease interest expense
increase cash, increase loans payable
7. Which of the following accounts is classified as an asset on a balance
sheet?
Retained earnings
Accounts payable
Unearned revenue
Accounts receivable
,8. You read in the newspaper that a local company you are familiar with
has been found guilty in court of publishing financial statements that are
false and misleading to users of those financial statements. In this
situation, what could the American Institute of Certified Public
Accountants (AICPA) do in response to the accountants who were
found guilty of unethical conduct in accounting practices?
Implement professional sanctions
Report the business to the FASB
Enforce legal punishments
Cover up the unethical conduct with flattering news reports
9. Why is it critical for companies to comply with tax laws in their
accounting practices?
Compliance with tax laws ensures that the company avoids
legal penalties and maintains its reputation.
Compliance with tax laws is only necessary for publicly traded
companies.
Compliance with tax laws allows companies to ignore ethical
standards.
Compliance with tax laws guarantees higher profits.
10. Describe the main difference between management accounting and
financial accounting in terms of their target audience.
Management accounting is aimed at internal users, while
financial accounting is aimed at external users.
Both management and financial accounting target internal users.
Management accounting and financial accounting serve the
same audience.
Financial accounting is focused on internal decision-making,
, while management accounting is for external reporting.
11. Which document is primarily used to summarize a company's financial
performance over a specific period?
Financial reports
Corporate budget
Cost analysis
Bank statements
12. Describe the significance of the SEC in the context of financial
reporting and investor protection.
The SEC plays a crucial role in ensuring that financial markets
operate fairly and transparently, which protects investors by
requiring companies to provide accurate financial information.
The SEC's main function is to establish accounting standards for
international use.
The SEC is primarily focused on enforcing income tax
compliance among businesses.
The SEC provides financial advice to investors on stock
purchases.
13. Describe the primary responsibilities of the IASB in the context of
accounting standards.
The IASB provides funding for accounting education programs.
The IASB enforces tax regulations for businesses.
The IASB is responsible for developing and issuing
International Financial Reporting Standards (IFRS) to ensure
transparency and consistency in financial reporting.
The IASB audits financial statements of companies worldwide.
