Wall Street Prep Accounting Crash Course Exam
1. A company purchases equipment for cash. What is the immediate accounting effect Which response is most appropriate
in this situation?
• Assets increase and liabilities increase
■ One asset increases while another asset, cash, decreases
• Revenue increases and cash increases
• Equity decreases and liabilities increase
Answer: One asset increases while another asset, cash, decreases
2. If revenue is recognized on credit, which accounts are generally affected at the time of recognition Which response is
most appropriate in this situation?
• Cash and inventory
■ Accounts receivable and revenue
• Accounts payable and cash
• Debt and interest expense
Answer: Accounts receivable and revenue
3. What does EBITDA exclude from operating performance Which response is most appropriate in this situation?
• Revenue and gross profit
■ Interest, taxes, depreciation, and amortization
• Cash and accounts receivable
• Inventory and accounts payable
Answer: Interest, taxes, depreciation, and amortization
4. Why is working capital important in financial analysis Which response is most appropriate in this situation?
• It measures only long-term debt
■ It helps assess short-term operating liquidity and funding needs
• It replaces the income statement
• It determines the tax rate automatically
Answer: It helps assess short-term operating liquidity and funding needs
5. A company purchases equipment for cash. What is the immediate accounting effect What is the best next action?
■ One asset increases while another asset, cash, decreases
• Revenue increases and cash increases
• Equity decreases and liabilities increase
• Assets increase and liabilities increase
Answer: One asset increases while another asset, cash, decreases
6. If revenue is recognized on credit, which accounts are generally affected at the time of recognition What is the best next
action?
■ Accounts receivable and revenue
• Accounts payable and cash
• Debt and interest expense
• Cash and inventory
Answer: Accounts receivable and revenue
,7. What does EBITDA exclude from operating performance What is the best next action?
■ Interest, taxes, depreciation, and amortization
• Cash and accounts receivable
• Inventory and accounts payable
• Revenue and gross profit
Answer: Interest, taxes, depreciation, and amortization
8. Why is working capital important in financial analysis What is the best next action?
■ It helps assess short-term operating liquidity and funding needs
• It replaces the income statement
• It determines the tax rate automatically
• It measures only long-term debt
Answer: It helps assess short-term operating liquidity and funding needs
9. A company purchases equipment for cash. What is the immediate accounting effect Which option best reflects sound
professional judgment?
• Revenue increases and cash increases
• Equity decreases and liabilities increase
• Assets increase and liabilities increase
■ One asset increases while another asset, cash, decreases
Answer: One asset increases while another asset, cash, decreases
10. If revenue is recognized on credit, which accounts are generally affected at the time of recognition Which option best
reflects sound professional judgment?
• Accounts payable and cash
• Debt and interest expense
• Cash and inventory
■ Accounts receivable and revenue
Answer: Accounts receivable and revenue
11. What does EBITDA exclude from operating performance Which option best reflects sound professional judgment?
• Cash and accounts receivable
• Inventory and accounts payable
• Revenue and gross profit
■ Interest, taxes, depreciation, and amortization
Answer: Interest, taxes, depreciation, and amortization
12. Why is working capital important in financial analysis Which option best reflects sound professional judgment?
• It replaces the income statement
• It determines the tax rate automatically
• It measures only long-term debt
■ It helps assess short-term operating liquidity and funding needs
Answer: It helps assess short-term operating liquidity and funding needs
13. A company purchases equipment for cash. What is the immediate accounting effect Which choice is most consistent with
safe practice?
• Equity decreases and liabilities increase
, • Assets increase and liabilities increase
■ One asset increases while another asset, cash, decreases
• Revenue increases and cash increases
Answer: One asset increases while another asset, cash, decreases
14. If revenue is recognized on credit, which accounts are generally affected at the time of recognition Which choice is most
consistent with safe practice?
• Debt and interest expense
• Cash and inventory
■ Accounts receivable and revenue
• Accounts payable and cash
Answer: Accounts receivable and revenue
15. What does EBITDA exclude from operating performance Which choice is most consistent with safe practice?
• Inventory and accounts payable
• Revenue and gross profit
■ Interest, taxes, depreciation, and amortization
• Cash and accounts receivable
Answer: Interest, taxes, depreciation, and amortization
16. Why is working capital important in financial analysis Which choice is most consistent with safe practice?
• It determines the tax rate automatically
• It measures only long-term debt
■ It helps assess short-term operating liquidity and funding needs
• It replaces the income statement
Answer: It helps assess short-term operating liquidity and funding needs
17. A company purchases equipment for cash. What is the immediate accounting effect Which response is most appropriate
in this situation?
• Assets increase and liabilities increase
■ One asset increases while another asset, cash, decreases
• Revenue increases and cash increases
• Equity decreases and liabilities increase
Answer: One asset increases while another asset, cash, decreases
18. If revenue is recognized on credit, which accounts are generally affected at the time of recognition Which response is
most appropriate in this situation?
• Cash and inventory
■ Accounts receivable and revenue
• Accounts payable and cash
• Debt and interest expense
Answer: Accounts receivable and revenue
19. What does EBITDA exclude from operating performance Which response is most appropriate in this situation?
• Revenue and gross profit
■ Interest, taxes, depreciation, and amortization
• Cash and accounts receivable
, • Inventory and accounts payable
Answer: Interest, taxes, depreciation, and amortization
20. Why is working capital important in financial analysis Which response is most appropriate in this situation?
• It measures only long-term debt
■ It helps assess short-term operating liquidity and funding needs
• It replaces the income statement
• It determines the tax rate automatically
Answer: It helps assess short-term operating liquidity and funding needs
21. A company purchases equipment for cash. What is the immediate accounting effect What is the best next action?
■ One asset increases while another asset, cash, decreases
• Revenue increases and cash increases
• Equity decreases and liabilities increase
• Assets increase and liabilities increase
Answer: One asset increases while another asset, cash, decreases
22. If revenue is recognized on credit, which accounts are generally affected at the time of recognition What is the best next
action?
■ Accounts receivable and revenue
• Accounts payable and cash
• Debt and interest expense
• Cash and inventory
Answer: Accounts receivable and revenue
23. What does EBITDA exclude from operating performance What is the best next action?
■ Interest, taxes, depreciation, and amortization
• Cash and accounts receivable
• Inventory and accounts payable
• Revenue and gross profit
Answer: Interest, taxes, depreciation, and amortization
24. Why is working capital important in financial analysis What is the best next action?
■ It helps assess short-term operating liquidity and funding needs
• It replaces the income statement
• It determines the tax rate automatically
• It measures only long-term debt
Answer: It helps assess short-term operating liquidity and funding needs
25. A company purchases equipment for cash. What is the immediate accounting effect Which option best reflects sound
professional judgment?
• Revenue increases and cash increases
• Equity decreases and liabilities increase
• Assets increase and liabilities increase
■ One asset increases while another asset, cash, decreases
Answer: One asset increases while another asset, cash, decreases
1. A company purchases equipment for cash. What is the immediate accounting effect Which response is most appropriate
in this situation?
• Assets increase and liabilities increase
■ One asset increases while another asset, cash, decreases
• Revenue increases and cash increases
• Equity decreases and liabilities increase
Answer: One asset increases while another asset, cash, decreases
2. If revenue is recognized on credit, which accounts are generally affected at the time of recognition Which response is
most appropriate in this situation?
• Cash and inventory
■ Accounts receivable and revenue
• Accounts payable and cash
• Debt and interest expense
Answer: Accounts receivable and revenue
3. What does EBITDA exclude from operating performance Which response is most appropriate in this situation?
• Revenue and gross profit
■ Interest, taxes, depreciation, and amortization
• Cash and accounts receivable
• Inventory and accounts payable
Answer: Interest, taxes, depreciation, and amortization
4. Why is working capital important in financial analysis Which response is most appropriate in this situation?
• It measures only long-term debt
■ It helps assess short-term operating liquidity and funding needs
• It replaces the income statement
• It determines the tax rate automatically
Answer: It helps assess short-term operating liquidity and funding needs
5. A company purchases equipment for cash. What is the immediate accounting effect What is the best next action?
■ One asset increases while another asset, cash, decreases
• Revenue increases and cash increases
• Equity decreases and liabilities increase
• Assets increase and liabilities increase
Answer: One asset increases while another asset, cash, decreases
6. If revenue is recognized on credit, which accounts are generally affected at the time of recognition What is the best next
action?
■ Accounts receivable and revenue
• Accounts payable and cash
• Debt and interest expense
• Cash and inventory
Answer: Accounts receivable and revenue
,7. What does EBITDA exclude from operating performance What is the best next action?
■ Interest, taxes, depreciation, and amortization
• Cash and accounts receivable
• Inventory and accounts payable
• Revenue and gross profit
Answer: Interest, taxes, depreciation, and amortization
8. Why is working capital important in financial analysis What is the best next action?
■ It helps assess short-term operating liquidity and funding needs
• It replaces the income statement
• It determines the tax rate automatically
• It measures only long-term debt
Answer: It helps assess short-term operating liquidity and funding needs
9. A company purchases equipment for cash. What is the immediate accounting effect Which option best reflects sound
professional judgment?
• Revenue increases and cash increases
• Equity decreases and liabilities increase
• Assets increase and liabilities increase
■ One asset increases while another asset, cash, decreases
Answer: One asset increases while another asset, cash, decreases
10. If revenue is recognized on credit, which accounts are generally affected at the time of recognition Which option best
reflects sound professional judgment?
• Accounts payable and cash
• Debt and interest expense
• Cash and inventory
■ Accounts receivable and revenue
Answer: Accounts receivable and revenue
11. What does EBITDA exclude from operating performance Which option best reflects sound professional judgment?
• Cash and accounts receivable
• Inventory and accounts payable
• Revenue and gross profit
■ Interest, taxes, depreciation, and amortization
Answer: Interest, taxes, depreciation, and amortization
12. Why is working capital important in financial analysis Which option best reflects sound professional judgment?
• It replaces the income statement
• It determines the tax rate automatically
• It measures only long-term debt
■ It helps assess short-term operating liquidity and funding needs
Answer: It helps assess short-term operating liquidity and funding needs
13. A company purchases equipment for cash. What is the immediate accounting effect Which choice is most consistent with
safe practice?
• Equity decreases and liabilities increase
, • Assets increase and liabilities increase
■ One asset increases while another asset, cash, decreases
• Revenue increases and cash increases
Answer: One asset increases while another asset, cash, decreases
14. If revenue is recognized on credit, which accounts are generally affected at the time of recognition Which choice is most
consistent with safe practice?
• Debt and interest expense
• Cash and inventory
■ Accounts receivable and revenue
• Accounts payable and cash
Answer: Accounts receivable and revenue
15. What does EBITDA exclude from operating performance Which choice is most consistent with safe practice?
• Inventory and accounts payable
• Revenue and gross profit
■ Interest, taxes, depreciation, and amortization
• Cash and accounts receivable
Answer: Interest, taxes, depreciation, and amortization
16. Why is working capital important in financial analysis Which choice is most consistent with safe practice?
• It determines the tax rate automatically
• It measures only long-term debt
■ It helps assess short-term operating liquidity and funding needs
• It replaces the income statement
Answer: It helps assess short-term operating liquidity and funding needs
17. A company purchases equipment for cash. What is the immediate accounting effect Which response is most appropriate
in this situation?
• Assets increase and liabilities increase
■ One asset increases while another asset, cash, decreases
• Revenue increases and cash increases
• Equity decreases and liabilities increase
Answer: One asset increases while another asset, cash, decreases
18. If revenue is recognized on credit, which accounts are generally affected at the time of recognition Which response is
most appropriate in this situation?
• Cash and inventory
■ Accounts receivable and revenue
• Accounts payable and cash
• Debt and interest expense
Answer: Accounts receivable and revenue
19. What does EBITDA exclude from operating performance Which response is most appropriate in this situation?
• Revenue and gross profit
■ Interest, taxes, depreciation, and amortization
• Cash and accounts receivable
, • Inventory and accounts payable
Answer: Interest, taxes, depreciation, and amortization
20. Why is working capital important in financial analysis Which response is most appropriate in this situation?
• It measures only long-term debt
■ It helps assess short-term operating liquidity and funding needs
• It replaces the income statement
• It determines the tax rate automatically
Answer: It helps assess short-term operating liquidity and funding needs
21. A company purchases equipment for cash. What is the immediate accounting effect What is the best next action?
■ One asset increases while another asset, cash, decreases
• Revenue increases and cash increases
• Equity decreases and liabilities increase
• Assets increase and liabilities increase
Answer: One asset increases while another asset, cash, decreases
22. If revenue is recognized on credit, which accounts are generally affected at the time of recognition What is the best next
action?
■ Accounts receivable and revenue
• Accounts payable and cash
• Debt and interest expense
• Cash and inventory
Answer: Accounts receivable and revenue
23. What does EBITDA exclude from operating performance What is the best next action?
■ Interest, taxes, depreciation, and amortization
• Cash and accounts receivable
• Inventory and accounts payable
• Revenue and gross profit
Answer: Interest, taxes, depreciation, and amortization
24. Why is working capital important in financial analysis What is the best next action?
■ It helps assess short-term operating liquidity and funding needs
• It replaces the income statement
• It determines the tax rate automatically
• It measures only long-term debt
Answer: It helps assess short-term operating liquidity and funding needs
25. A company purchases equipment for cash. What is the immediate accounting effect Which option best reflects sound
professional judgment?
• Revenue increases and cash increases
• Equity decreases and liabilities increase
• Assets increase and liabilities increase
■ One asset increases while another asset, cash, decreases
Answer: One asset increases while another asset, cash, decreases
