WGU D774 Intro to Business Accounting |
OA | Objective Assessment | 2026 Update |
100% Correct|| Questions and Well Detailed
Answers Plus Rationales
Course
WGU D774 Intro to Business Accounting
1. Which financial statement reports a company's assets, liabilities, and equity at a specific
point in time?
A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
Answer: C. Balance sheet
Rationale: The balance sheet presents the company's financial position at a specific date. It
follows the fundamental equation:
Assets = Liabilities + Equity
2. Which accounting equation is correct?
A. Assets = Liabilities − Equity
B. Assets = Liabilities + Equity
C. Equity = Assets + Liabilities
D. Liabilities = Assets + Equity
Answer: B. Assets = Liabilities + Equity
Rationale: The accounting equation is the foundation of double-entry accounting. Every
transaction must keep the equation in balance.
3. A business purchases equipment for $8,000 cash. What is the effect on the accounting
equation?
A. Assets increase $8,000 and liabilities increase $8,000
B. Assets decrease $8,000 and equity decreases $8,000
,C. One asset increases $8,000 while another asset decreases $8,000
D. Equity increases $8,000
Answer: C
Rationale: Equipment increases by $8,000 while cash decreases by $8,000. Total assets remain
unchanged.
4. A company provides $4,000 of services to a customer on account. What happens?
A. Accounts receivable increases and revenue increases
B. Cash increases and revenue decreases
C. Accounts payable increases and cash decreases
D. Equipment increases and equity decreases
Answer: A
Rationale: Because the customer has not yet paid, the company records Accounts Receivable.
The service has been earned, so Revenue increases.
5. Which account normally has a debit balance?
A. Revenue
B. Accounts payable
C. Cash
D. Common stock
Answer: C. Cash
Rationale: Assets normally have debit balances. Cash is an asset. Liabilities, equity, and revenue
normally carry credit balances.
6. Which account normally has a credit balance?
A. Supplies
B. Accounts receivable
C. Accounts payable
D. Prepaid insurance
Answer: C. Accounts payable
,Rationale: Accounts payable is a liability, and liabilities normally have credit balances.
7. Which transaction increases both an asset and a liability?
A. Paying an account payable
B. Purchasing equipment on account
C. Paying employees for wages
D. Collecting an account receivable
Answer: B
Rationale: Purchasing equipment on account increases Equipment, an asset, and Accounts
Payable, a liability.
8. A company pays $2,000 toward an outstanding accounts payable. What is the effect?
A. Assets increase and liabilities increase
B. Assets decrease and liabilities decrease
C. Assets increase and equity decreases
D. Liabilities increase and equity increases
Answer: B
Rationale: Cash decreases by $2,000 and Accounts Payable decreases by $2,000. The
accounting equation remains balanced.
9. Which statement primarily reports revenues and expenses for a period?
A. Balance sheet
B. Income statement
C. Statement of cash flows
D. Trial balance
Answer: B. Income statement
Rationale: The income statement determines whether a company generated net income or net
loss during a specified period.
10. A company has revenue of $75,000 and expenses of $52,000. What is net income?
, A. $23,000
B. $27,000
C. $52,000
D. $127,000
Answer: A. $23,000
Rationale:
Net income = Revenue − Expenses
$75,000 − $52,000 = $23,000
11. Which situation results in a net loss?
A. Revenue exceeds expenses
B. Expenses exceed revenue
C. Assets exceed liabilities
D. Equity exceeds liabilities
Answer: B
Rationale: A company reports a net loss when total expenses exceed total revenues for the
accounting period.
12. What is the primary purpose of a trial balance?
A. Determine the market value of a company
B. Verify that total debits equal total credits
C. Calculate cash flows only
D. Determine the company's tax rate
Answer: B
Rationale: A trial balance lists account balances and checks the mathematical equality of debits
and credits. However, a balanced trial balance does not prove that every transaction was
recorded correctly.
13. Which error can exist even when a trial balance is balanced?
OA | Objective Assessment | 2026 Update |
100% Correct|| Questions and Well Detailed
Answers Plus Rationales
Course
WGU D774 Intro to Business Accounting
1. Which financial statement reports a company's assets, liabilities, and equity at a specific
point in time?
A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
Answer: C. Balance sheet
Rationale: The balance sheet presents the company's financial position at a specific date. It
follows the fundamental equation:
Assets = Liabilities + Equity
2. Which accounting equation is correct?
A. Assets = Liabilities − Equity
B. Assets = Liabilities + Equity
C. Equity = Assets + Liabilities
D. Liabilities = Assets + Equity
Answer: B. Assets = Liabilities + Equity
Rationale: The accounting equation is the foundation of double-entry accounting. Every
transaction must keep the equation in balance.
3. A business purchases equipment for $8,000 cash. What is the effect on the accounting
equation?
A. Assets increase $8,000 and liabilities increase $8,000
B. Assets decrease $8,000 and equity decreases $8,000
,C. One asset increases $8,000 while another asset decreases $8,000
D. Equity increases $8,000
Answer: C
Rationale: Equipment increases by $8,000 while cash decreases by $8,000. Total assets remain
unchanged.
4. A company provides $4,000 of services to a customer on account. What happens?
A. Accounts receivable increases and revenue increases
B. Cash increases and revenue decreases
C. Accounts payable increases and cash decreases
D. Equipment increases and equity decreases
Answer: A
Rationale: Because the customer has not yet paid, the company records Accounts Receivable.
The service has been earned, so Revenue increases.
5. Which account normally has a debit balance?
A. Revenue
B. Accounts payable
C. Cash
D. Common stock
Answer: C. Cash
Rationale: Assets normally have debit balances. Cash is an asset. Liabilities, equity, and revenue
normally carry credit balances.
6. Which account normally has a credit balance?
A. Supplies
B. Accounts receivable
C. Accounts payable
D. Prepaid insurance
Answer: C. Accounts payable
,Rationale: Accounts payable is a liability, and liabilities normally have credit balances.
7. Which transaction increases both an asset and a liability?
A. Paying an account payable
B. Purchasing equipment on account
C. Paying employees for wages
D. Collecting an account receivable
Answer: B
Rationale: Purchasing equipment on account increases Equipment, an asset, and Accounts
Payable, a liability.
8. A company pays $2,000 toward an outstanding accounts payable. What is the effect?
A. Assets increase and liabilities increase
B. Assets decrease and liabilities decrease
C. Assets increase and equity decreases
D. Liabilities increase and equity increases
Answer: B
Rationale: Cash decreases by $2,000 and Accounts Payable decreases by $2,000. The
accounting equation remains balanced.
9. Which statement primarily reports revenues and expenses for a period?
A. Balance sheet
B. Income statement
C. Statement of cash flows
D. Trial balance
Answer: B. Income statement
Rationale: The income statement determines whether a company generated net income or net
loss during a specified period.
10. A company has revenue of $75,000 and expenses of $52,000. What is net income?
, A. $23,000
B. $27,000
C. $52,000
D. $127,000
Answer: A. $23,000
Rationale:
Net income = Revenue − Expenses
$75,000 − $52,000 = $23,000
11. Which situation results in a net loss?
A. Revenue exceeds expenses
B. Expenses exceed revenue
C. Assets exceed liabilities
D. Equity exceeds liabilities
Answer: B
Rationale: A company reports a net loss when total expenses exceed total revenues for the
accounting period.
12. What is the primary purpose of a trial balance?
A. Determine the market value of a company
B. Verify that total debits equal total credits
C. Calculate cash flows only
D. Determine the company's tax rate
Answer: B
Rationale: A trial balance lists account balances and checks the mathematical equality of debits
and credits. However, a balanced trial balance does not prove that every transaction was
recorded correctly.
13. Which error can exist even when a trial balance is balanced?
