WGU D196 TEST BANK: 300 PRACTICE QUESTIONS
PRINCIPLES OF FINANCIAL AND MANAGERIAL
ACCOUNTING 2025/2026 COMPLETE REVIEW WITH
ANSWERS & RATIONALES
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SECTION 1: ACCOUNTING FUNDAMENTALS & ETHICS (Questions 1-30)
Question 1
What is the effect of a company's accounting department maintaining high ethical
standards?
A) The company can report more favorable results in its financial statements
B) The company's accounting information will decrease in value
C) The company can hire fewer accountants to do the same amount of work
D) The company's accounting information will increase in value
Correct Answer: D
Rationale: High ethical standards enhance the reliability and credibility of
accounting information, increasing its value to decision-makers. Unethical
practices can lead to misstatements, legal issues, and loss of stakeholder trust .
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Question 2
Why might employees be interested in their company's financial accounting
information?
A) Financial statement data are used to record long-term liabilities
B) Financial statement data provide detailed internal budget information
C) Financial statement data provide item-by-item product cost information
D) Financial statement data are often used in determining employee bonuses
Correct Answer: D
Rationale: Employees have a direct interest in financial performance because
many companies use financial metrics to determine bonuses, profit-sharing, and
compensation decisions .
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Question 3
Which group establishes financial accounting rules in the United States?
A) Internal Revenue Service (IRS)
B) Financial Accounting Standards Board (FASB)
C) Securities and Exchange Commission (SEC)
,D) American Institute of CPAs (AICPA)
Correct Answer: B
Rationale: The FASB is the private-sector body that establishes financial
accounting and reporting standards (GAAP) in the United States .
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Question 4
Which of the following is NOT an example of a business transaction?
A) Receive cash in payment of an invoice
B) Purchase an asset from a supplier
C) Sale on credit to a customer
D) Preparing financial statements
Correct Answer: D
Rationale: Preparing financial statements is a reporting activity, not an economic
event that changes the accounting equation. Transactions involve exchanges of
value between the business and external parties .
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Question 5
, What is bookkeeping primarily concerned with?
A) Analyzing financial performance
B) Preparing financial statements
C) Keeping track of daily transactions
D) Conducting audits
Correct Answer: C
Rationale: Bookkeeping is the day-to-day recording of financial transactions, while
accounting involves the broader analysis, interpretation, and reporting of financial
information .
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Question 6
What are the three primary sources of capital for a business?
A) Investors, government grants, and loans
B) Investors, creditors, and retained earnings
C) Banks, suppliers, and customers
D) Stock market, bonds, and dividends
Correct Answer: B
PRINCIPLES OF FINANCIAL AND MANAGERIAL
ACCOUNTING 2025/2026 COMPLETE REVIEW WITH
ANSWERS & RATIONALES
---
SECTION 1: ACCOUNTING FUNDAMENTALS & ETHICS (Questions 1-30)
Question 1
What is the effect of a company's accounting department maintaining high ethical
standards?
A) The company can report more favorable results in its financial statements
B) The company's accounting information will decrease in value
C) The company can hire fewer accountants to do the same amount of work
D) The company's accounting information will increase in value
Correct Answer: D
Rationale: High ethical standards enhance the reliability and credibility of
accounting information, increasing its value to decision-makers. Unethical
practices can lead to misstatements, legal issues, and loss of stakeholder trust .
,---
Question 2
Why might employees be interested in their company's financial accounting
information?
A) Financial statement data are used to record long-term liabilities
B) Financial statement data provide detailed internal budget information
C) Financial statement data provide item-by-item product cost information
D) Financial statement data are often used in determining employee bonuses
Correct Answer: D
Rationale: Employees have a direct interest in financial performance because
many companies use financial metrics to determine bonuses, profit-sharing, and
compensation decisions .
---
Question 3
Which group establishes financial accounting rules in the United States?
A) Internal Revenue Service (IRS)
B) Financial Accounting Standards Board (FASB)
C) Securities and Exchange Commission (SEC)
,D) American Institute of CPAs (AICPA)
Correct Answer: B
Rationale: The FASB is the private-sector body that establishes financial
accounting and reporting standards (GAAP) in the United States .
---
Question 4
Which of the following is NOT an example of a business transaction?
A) Receive cash in payment of an invoice
B) Purchase an asset from a supplier
C) Sale on credit to a customer
D) Preparing financial statements
Correct Answer: D
Rationale: Preparing financial statements is a reporting activity, not an economic
event that changes the accounting equation. Transactions involve exchanges of
value between the business and external parties .
---
Question 5
, What is bookkeeping primarily concerned with?
A) Analyzing financial performance
B) Preparing financial statements
C) Keeping track of daily transactions
D) Conducting audits
Correct Answer: C
Rationale: Bookkeeping is the day-to-day recording of financial transactions, while
accounting involves the broader analysis, interpretation, and reporting of financial
information .
---
Question 6
What are the three primary sources of capital for a business?
A) Investors, government grants, and loans
B) Investors, creditors, and retained earnings
C) Banks, suppliers, and customers
D) Stock market, bonds, and dividends
Correct Answer: B
