WGU D196 Principles of Financial Accounting
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Which financial statement reports a company's financial position at a specific point in
time?
a. Income Statement
b. Statement of Cash Flows
c. Balance Sheet
d. Statement of Retained Earnings
✔️ Correct Answer: C
Rationale:
,The balance sheet shows assets, liabilities, and equity at a specific date, reflecting the
company's financial position. It is a snapshot of what the company owns (assets), what it
owes (liabilities), and the owners' claim (equity) at a particular point in time. The other
statements report activity over a period of time.
Option A is incorrect because the income statement reports revenues and expenses over
a period of time. Option B is incorrect because the statement of cash flows reports cash
inflows and outflows over a period. Option D is incorrect because the statement of
retained earnings shows changes in retained earnings over a period.
Revenue is recognized when:
a. Cash is received
b. Goods or services are delivered
c. The invoice is prepared
d. The customer places an order
✔️ Correct Answer: B
Rationale:
Under the revenue recognition principle, revenue is recorded when earned, usually when
goods or services are delivered. This is a key concept in accrual accounting. Revenue
should be recognized when the performance obligation is satisfied, which typically occurs
when control of the goods or services transfers to the customer.
Option A is incorrect because cash receipt may occur before or after revenue is earned.
Option C is incorrect because preparing an invoice does not necessarily mean revenue
has been earned. Option D is incorrect because placing an order does not constitute
earning revenue.
Which account is increased with a credit?
a. Cash
b. Accounts Receivable
c. Accounts Payable
d. Equipment
,✔️ Correct Answer: C
Rationale:
Liabilities like Accounts Payable increase with a credit entry. The normal balance for
liability accounts is a credit. Assets (Cash, Accounts Receivable, Equipment) have normal
debit balances. Understanding normal balances is fundamental to double-entry
accounting.
Option A is incorrect because Cash is an asset and increases with a debit. Option B is
incorrect because Accounts Receivable is an asset and increases with a debit. Option D is
incorrect because Equipment is an asset and increases with a debit.
The accounting equation is:
a. Assets + Liabilities = Equity
b. Assets = Liabilities + Equity
c. Assets = Revenue – Expenses
d. Assets – Liabilities = Revenue
✔️ Correct Answer: B
Rationale:
The fundamental accounting equation is Assets = Liabilities + Equity. This equation must
always balance and is the foundation of double-entry accounting. It shows that assets are
financed either by borrowing (liabilities) or by owner investment (equity).
Option A is incorrect because the equation is Assets = Liabilities + Equity, not Assets +
Liabilities = Equity. Option C is incorrect because Revenue – Expenses = Net Income, not
the accounting equation. Option D is incorrect because it does not represent the
accounting equation.
Which principle requires that expenses be recorded in the same period as the revenue
they help generate?
a. Revenue Recognition Principle
b. Matching Principle
, c. Cost Principle
d. Conservatism Principle
✔️ Correct Answer: B
Rationale:
The matching principle ensures expenses are recognized in the period when related
revenue is earned. This principle is fundamental to accrual accounting and helps
accurately measure net income. Expenses are matched with the revenues they help to
generate.
Option A is incorrect because the revenue recognition principle addresses when to record
revenue. Option C is incorrect because the cost principle addresses how to record assets.
Option D is incorrect because the conservatism principle guides the reporting of
uncertainty.
Depreciation expense is recorded to:
a. Allocate the cost of an asset over its useful life
b. Reduce cash
c. Record asset appreciation
d. Adjust revenue
✔️ Correct Answer: A
Rationale:
Depreciation spreads the cost of a long-lived asset over its useful life. This matches the
cost of the asset with the revenue it helps generate, in accordance with the matching
principle. Depreciation is a non-cash expense that reduces the book value of the asset.
Option B is incorrect because depreciation does not affect cash. Option C is incorrect
because depreciation does not record appreciation; it records the allocation of cost.
Option D is incorrect because depreciation is an expense, not a revenue adjustment.
Which of the following is a current asset?
a. Land
b. Accounts Receivable
MOST TESTED AND HIGH YIELD QUESTIONS
WITH ANSWERS AND EXPLANATIONS | RATED GRADE
A+ | GUARANTEED PASS |
2026/2027 Frequently Most Tested Questions and 100%
Accurate From Past papers | Graded A+ , Reviewed and
Updated | 100% Guarantee Pass | Latest Exam and
Newest Version!!!
Which financial statement reports a company's financial position at a specific point in
time?
a. Income Statement
b. Statement of Cash Flows
c. Balance Sheet
d. Statement of Retained Earnings
✔️ Correct Answer: C
Rationale:
,The balance sheet shows assets, liabilities, and equity at a specific date, reflecting the
company's financial position. It is a snapshot of what the company owns (assets), what it
owes (liabilities), and the owners' claim (equity) at a particular point in time. The other
statements report activity over a period of time.
Option A is incorrect because the income statement reports revenues and expenses over
a period of time. Option B is incorrect because the statement of cash flows reports cash
inflows and outflows over a period. Option D is incorrect because the statement of
retained earnings shows changes in retained earnings over a period.
Revenue is recognized when:
a. Cash is received
b. Goods or services are delivered
c. The invoice is prepared
d. The customer places an order
✔️ Correct Answer: B
Rationale:
Under the revenue recognition principle, revenue is recorded when earned, usually when
goods or services are delivered. This is a key concept in accrual accounting. Revenue
should be recognized when the performance obligation is satisfied, which typically occurs
when control of the goods or services transfers to the customer.
Option A is incorrect because cash receipt may occur before or after revenue is earned.
Option C is incorrect because preparing an invoice does not necessarily mean revenue
has been earned. Option D is incorrect because placing an order does not constitute
earning revenue.
Which account is increased with a credit?
a. Cash
b. Accounts Receivable
c. Accounts Payable
d. Equipment
,✔️ Correct Answer: C
Rationale:
Liabilities like Accounts Payable increase with a credit entry. The normal balance for
liability accounts is a credit. Assets (Cash, Accounts Receivable, Equipment) have normal
debit balances. Understanding normal balances is fundamental to double-entry
accounting.
Option A is incorrect because Cash is an asset and increases with a debit. Option B is
incorrect because Accounts Receivable is an asset and increases with a debit. Option D is
incorrect because Equipment is an asset and increases with a debit.
The accounting equation is:
a. Assets + Liabilities = Equity
b. Assets = Liabilities + Equity
c. Assets = Revenue – Expenses
d. Assets – Liabilities = Revenue
✔️ Correct Answer: B
Rationale:
The fundamental accounting equation is Assets = Liabilities + Equity. This equation must
always balance and is the foundation of double-entry accounting. It shows that assets are
financed either by borrowing (liabilities) or by owner investment (equity).
Option A is incorrect because the equation is Assets = Liabilities + Equity, not Assets +
Liabilities = Equity. Option C is incorrect because Revenue – Expenses = Net Income, not
the accounting equation. Option D is incorrect because it does not represent the
accounting equation.
Which principle requires that expenses be recorded in the same period as the revenue
they help generate?
a. Revenue Recognition Principle
b. Matching Principle
, c. Cost Principle
d. Conservatism Principle
✔️ Correct Answer: B
Rationale:
The matching principle ensures expenses are recognized in the period when related
revenue is earned. This principle is fundamental to accrual accounting and helps
accurately measure net income. Expenses are matched with the revenues they help to
generate.
Option A is incorrect because the revenue recognition principle addresses when to record
revenue. Option C is incorrect because the cost principle addresses how to record assets.
Option D is incorrect because the conservatism principle guides the reporting of
uncertainty.
Depreciation expense is recorded to:
a. Allocate the cost of an asset over its useful life
b. Reduce cash
c. Record asset appreciation
d. Adjust revenue
✔️ Correct Answer: A
Rationale:
Depreciation spreads the cost of a long-lived asset over its useful life. This matches the
cost of the asset with the revenue it helps generate, in accordance with the matching
principle. Depreciation is a non-cash expense that reduces the book value of the asset.
Option B is incorrect because depreciation does not affect cash. Option C is incorrect
because depreciation does not record appreciation; it records the allocation of cost.
Option D is incorrect because depreciation is an expense, not a revenue adjustment.
Which of the following is a current asset?
a. Land
b. Accounts Receivable
