WGU D102: FINANCIAL ACCOUNTING EXAM QUESTIONS AND
ANSWERS - 100% VERIFIED - LATEST 2026/2027 -
GUARANTEED PASS
1. Q: What is the primary purpose of financial accounting? ANSWER To
provide financial information to external users (investors, creditors,
regulators) to make decisions.
2. Q: What is the primary purpose of managerial accounting? ANSWER To
provide financial information to internal users (management) for
planning, controlling, and decision-making.
3. Q: What are the three main types of business entities? ANSWER Sole
proprietorship, partnership, and corporation.
4. Q: Which entity type offers limited liability to its owners? ANSWER
Corporation.
5. Q: What is the accounting equation? ANSWER Assets = Liabilities +
Stockholders' Equity.
6. Q: What are Assets? ANSWER Resources owned by a business that have
future economic value (e.g., cash, inventory, equipment).
7. Q: What are Liabilities? ANSWER Debts or obligations owed by a
business to outsiders (e.g., accounts payable, notes payable).
8. Q: What is Stockholders' Equity? ANSWER The owners' claim to the
assets of the corporation (Common Stock + Retained Earnings).
9. Q: What is the Separate Entity Assumption? ANSWER The business is
treated as an entity separate from its owners for accounting purposes.
10.Q: What is the Monetary Unit Assumption? ANSWER Only transaction
data that can be expressed in terms of money are included in the
accounting records.
11.Q: What is the Going Concern Assumption? ANSWER The assumption
that a business will continue to operate indefinitely.
,12.Q: What does GAAP stand for? ANSWER Generally Accepted
Accounting Principles.
13.Q: Who is responsible for creating GAAP in the US? ANSWER The
Financial Accounting Standards Board (FASB).
14.Q: What organization oversees the audits of public companies?
ANSWER The Public Company Accounting Oversight Board (PCAOB).
15.Q: What organization requires public companies to file financial reports?
ANSWER The Securities and Exchange Commission (SEC).
16.Q: What is accrual-basis accounting? ANSWER Accounting in which
transactions are recorded in the periods in which the events occur,
regardless of when cash is exchanged.
17.Q: What is cash-basis accounting? ANSWER Accounting in which
revenue is recorded only when cash is received, and expenses only when
cash is paid.
18.Q: What is the Revenue Recognition Principle? ANSWER Revenue
should be recognized in the accounting period in which the performance
obligation is satisfied.
19.Q: What is the Expense Recognition Principle (Matching Principle)?
ANSWER Expenses should be matched with revenues in the period when
efforts are made to generate those revenues.
20.Q: What is a chart of accounts? ANSWER A list of all accounts used by
a company and their assigned numbers.
21.Q: What is the normal balance of an Asset account? ANSWER Debit.
22.Q: What is the normal balance of a Liability account? ANSWER Credit.
23.Q: What is the normal balance of a Stockholders' Equity account?
ANSWER Credit.
24.Q: What is the normal balance of a Revenue account? ANSWER Credit.
25.Q: What is the normal balance of an Expense account? ANSWER Debit.
26.Q: What is a General Ledger? ANSWER A record containing all
accounts used by a company and their balances.
27.Q: What is a journal entry? ANSWER The act of recording a transaction
in debit/credit format in the general journal.
, 28.Q: What is the rule for debits and credits? ANSWER Debits must always
equal credits in every transaction.
29.Q: What is a Trial Balance? ANSWER A list of all accounts and their
balances at a specific point in time to prove mathematical equality
(Debits = Credits).
30.Q: Does a balanced trial balance guarantee that no errors were made?
ANSWER No. It doesn't catch errors like posting to the wrong account or
omitting a transaction entirely.
31.Q: What is an unadjusted trial balance? ANSWER A trial balance
prepared before adjusting entries are made.
32.Q: What is an adjusted trial balance? ANSWER A trial balance prepared
after adjusting entries are made.
33.Q: What are adjusting entries? ANSWER Entries made at the end of an
accounting period to update accounts before preparing financial
statements.
34.Q: What are the two main categories of adjusting entries? ANSWER
Deferrals (prepayments) and Accruals.
35.Q: Give an example of a deferral adjusting entry. ANSWER Recording
depreciation expense for equipment used during the period, or
recognizing rent expense that was prepaid.
Domain 2: Adjusting Entries & The Closing Process
36.Q: What is a prepaid expense? ANSWER An expense paid in cash and
recorded as an asset before it is used (e.g., prepaid insurance).
37.Q: What is the adjusting entry for a prepaid expense? ANSWER Debit
Expense, Credit Asset (to reduce the asset and record the used portion as
an expense).
38.Q: What is an unearned revenue? ANSWER Cash received and recorded
as a liability before revenue is earned (e.g., magazine subscriptions).
39.Q: What is the adjusting entry for unearned revenue? ANSWER Debit
Liability (Unearned Revenue), Credit Revenue (to recognize the portion
earned).
40.Q: What is an accrued revenue? ANSWER Revenue earned but not yet
received in cash or recorded (e.g., interest earned on a note).
ANSWERS - 100% VERIFIED - LATEST 2026/2027 -
GUARANTEED PASS
1. Q: What is the primary purpose of financial accounting? ANSWER To
provide financial information to external users (investors, creditors,
regulators) to make decisions.
2. Q: What is the primary purpose of managerial accounting? ANSWER To
provide financial information to internal users (management) for
planning, controlling, and decision-making.
3. Q: What are the three main types of business entities? ANSWER Sole
proprietorship, partnership, and corporation.
4. Q: Which entity type offers limited liability to its owners? ANSWER
Corporation.
5. Q: What is the accounting equation? ANSWER Assets = Liabilities +
Stockholders' Equity.
6. Q: What are Assets? ANSWER Resources owned by a business that have
future economic value (e.g., cash, inventory, equipment).
7. Q: What are Liabilities? ANSWER Debts or obligations owed by a
business to outsiders (e.g., accounts payable, notes payable).
8. Q: What is Stockholders' Equity? ANSWER The owners' claim to the
assets of the corporation (Common Stock + Retained Earnings).
9. Q: What is the Separate Entity Assumption? ANSWER The business is
treated as an entity separate from its owners for accounting purposes.
10.Q: What is the Monetary Unit Assumption? ANSWER Only transaction
data that can be expressed in terms of money are included in the
accounting records.
11.Q: What is the Going Concern Assumption? ANSWER The assumption
that a business will continue to operate indefinitely.
,12.Q: What does GAAP stand for? ANSWER Generally Accepted
Accounting Principles.
13.Q: Who is responsible for creating GAAP in the US? ANSWER The
Financial Accounting Standards Board (FASB).
14.Q: What organization oversees the audits of public companies?
ANSWER The Public Company Accounting Oversight Board (PCAOB).
15.Q: What organization requires public companies to file financial reports?
ANSWER The Securities and Exchange Commission (SEC).
16.Q: What is accrual-basis accounting? ANSWER Accounting in which
transactions are recorded in the periods in which the events occur,
regardless of when cash is exchanged.
17.Q: What is cash-basis accounting? ANSWER Accounting in which
revenue is recorded only when cash is received, and expenses only when
cash is paid.
18.Q: What is the Revenue Recognition Principle? ANSWER Revenue
should be recognized in the accounting period in which the performance
obligation is satisfied.
19.Q: What is the Expense Recognition Principle (Matching Principle)?
ANSWER Expenses should be matched with revenues in the period when
efforts are made to generate those revenues.
20.Q: What is a chart of accounts? ANSWER A list of all accounts used by
a company and their assigned numbers.
21.Q: What is the normal balance of an Asset account? ANSWER Debit.
22.Q: What is the normal balance of a Liability account? ANSWER Credit.
23.Q: What is the normal balance of a Stockholders' Equity account?
ANSWER Credit.
24.Q: What is the normal balance of a Revenue account? ANSWER Credit.
25.Q: What is the normal balance of an Expense account? ANSWER Debit.
26.Q: What is a General Ledger? ANSWER A record containing all
accounts used by a company and their balances.
27.Q: What is a journal entry? ANSWER The act of recording a transaction
in debit/credit format in the general journal.
, 28.Q: What is the rule for debits and credits? ANSWER Debits must always
equal credits in every transaction.
29.Q: What is a Trial Balance? ANSWER A list of all accounts and their
balances at a specific point in time to prove mathematical equality
(Debits = Credits).
30.Q: Does a balanced trial balance guarantee that no errors were made?
ANSWER No. It doesn't catch errors like posting to the wrong account or
omitting a transaction entirely.
31.Q: What is an unadjusted trial balance? ANSWER A trial balance
prepared before adjusting entries are made.
32.Q: What is an adjusted trial balance? ANSWER A trial balance prepared
after adjusting entries are made.
33.Q: What are adjusting entries? ANSWER Entries made at the end of an
accounting period to update accounts before preparing financial
statements.
34.Q: What are the two main categories of adjusting entries? ANSWER
Deferrals (prepayments) and Accruals.
35.Q: Give an example of a deferral adjusting entry. ANSWER Recording
depreciation expense for equipment used during the period, or
recognizing rent expense that was prepaid.
Domain 2: Adjusting Entries & The Closing Process
36.Q: What is a prepaid expense? ANSWER An expense paid in cash and
recorded as an asset before it is used (e.g., prepaid insurance).
37.Q: What is the adjusting entry for a prepaid expense? ANSWER Debit
Expense, Credit Asset (to reduce the asset and record the used portion as
an expense).
38.Q: What is an unearned revenue? ANSWER Cash received and recorded
as a liability before revenue is earned (e.g., magazine subscriptions).
39.Q: What is the adjusting entry for unearned revenue? ANSWER Debit
Liability (Unearned Revenue), Credit Revenue (to recognize the portion
earned).
40.Q: What is an accrued revenue? ANSWER Revenue earned but not yet
received in cash or recorded (e.g., interest earned on a note).
