Wgu D774 Intro To Business
Accounting Pa PRACTICE QUESTIONS
|ORIGINAL QUESTIONS & ANSWERS
|DETAILED RATIONALES |HINTED
COMPLETE EXAM PREP GRADED
A+*INSTANT DOWNLOAD PDF
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
Rationale: The balance sheet presents the accounting equation—
assets = liabilities + equity—at a specific date.
2. Which of the following is an asset?
A. Accounts payable
B. Common stock
C. Retained earnings
D. Accounts receivable
Rationale: Accounts receivable represents amounts owed to the
business by customers and therefore has future economic benefit.
3. The fundamental accounting equation is:
A. Assets + liabilities = equity
B. Assets − equity = liabilities
,C. Assets = liabilities + equity
D. Revenue − expenses = liabilities
Rationale: The accounting equation establishes the relationship
among resources, obligations, and owners' claims.
4. Which account represents an obligation owed to an outside
party?
A. Asset
B. Revenue
C. Equity
D. Liability
Rationale: Liabilities are present obligations resulting from past
transactions or events.
5. Which account normally has a debit balance?
A. Revenue
B. Liability
C. Equity
D. Asset
Rationale: Asset accounts normally increase with debits and decrease
with credits.
6. Which account normally has a credit balance?
A. Cash
B. Supplies
C. Equipment
D. Accounts payable
Rationale: Accounts payable is a liability, and liabilities normally carry
credit balances.
7. A company purchases equipment for cash. What is the effect on
the accounting equation?
,A. Assets increase and liabilities increase
B. Assets decrease and equity decreases
C. One asset increases while another asset decreases
D. Liabilities decrease and equity increases
Rationale: Equipment increases while cash decreases by the same
amount, leaving total assets unchanged.
8. Revenue is generally recognized when:
A. Cash is always received
B. A customer places an order
C. The company satisfies the applicable performance obligation and
earns the revenue
D. A company prepares its financial statements
Rationale: Under accrual accounting, revenue recognition is based on
when revenue is earned under the applicable accounting framework.
9. Which principle requires expenses to be recognized in the period
in which they help generate revenue?
A. Cost principle
B. Going-concern principle
C. Matching concept
D. Materiality principle
Rationale: The matching concept associates expenses with the
revenues they help produce.
10. What is the primary purpose of accounting?
A. Increase sales
B. Eliminate business risk
C. Provide useful financial information for decision-making
D. Guarantee profitability
Rationale: Accounting provides financial information to internal and
external users for economic decision-making.
, 11. Which user is an internal user of accounting information?
A. Bank lender
B. Government regulator
C. Investor
D. Company manager
Rationale: Managers work inside the organization and use
accounting information to plan, control, and make decisions.
12. Which is an external user of financial statements?
A. Production supervisor
B. Department manager
C. Creditor
D. Store manager
Rationale: Creditors are outside parties that use financial information
to evaluate lending and repayment risk.
13. What does GAAP stand for?
A. Generally Authorized Accounting Procedures
B. Governmental Accounting Analysis Principles
C. Generally Accepted Accounting Principles
D. General Administrative Accounting Practices
Rationale: GAAP refers to the authoritative accounting principles
used for financial reporting in the United States.
14. Which financial statement reports revenues and expenses?
A. Balance sheet
B. Statement of cash flows
C. Income statement
D. Bank reconciliation
Rationale: The income statement summarizes revenues, expenses,
gains, and losses over a period.
Accounting Pa PRACTICE QUESTIONS
|ORIGINAL QUESTIONS & ANSWERS
|DETAILED RATIONALES |HINTED
COMPLETE EXAM PREP GRADED
A+*INSTANT DOWNLOAD PDF
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
Rationale: The balance sheet presents the accounting equation—
assets = liabilities + equity—at a specific date.
2. Which of the following is an asset?
A. Accounts payable
B. Common stock
C. Retained earnings
D. Accounts receivable
Rationale: Accounts receivable represents amounts owed to the
business by customers and therefore has future economic benefit.
3. The fundamental accounting equation is:
A. Assets + liabilities = equity
B. Assets − equity = liabilities
,C. Assets = liabilities + equity
D. Revenue − expenses = liabilities
Rationale: The accounting equation establishes the relationship
among resources, obligations, and owners' claims.
4. Which account represents an obligation owed to an outside
party?
A. Asset
B. Revenue
C. Equity
D. Liability
Rationale: Liabilities are present obligations resulting from past
transactions or events.
5. Which account normally has a debit balance?
A. Revenue
B. Liability
C. Equity
D. Asset
Rationale: Asset accounts normally increase with debits and decrease
with credits.
6. Which account normally has a credit balance?
A. Cash
B. Supplies
C. Equipment
D. Accounts payable
Rationale: Accounts payable is a liability, and liabilities normally carry
credit balances.
7. A company purchases equipment for cash. What is the effect on
the accounting equation?
,A. Assets increase and liabilities increase
B. Assets decrease and equity decreases
C. One asset increases while another asset decreases
D. Liabilities decrease and equity increases
Rationale: Equipment increases while cash decreases by the same
amount, leaving total assets unchanged.
8. Revenue is generally recognized when:
A. Cash is always received
B. A customer places an order
C. The company satisfies the applicable performance obligation and
earns the revenue
D. A company prepares its financial statements
Rationale: Under accrual accounting, revenue recognition is based on
when revenue is earned under the applicable accounting framework.
9. Which principle requires expenses to be recognized in the period
in which they help generate revenue?
A. Cost principle
B. Going-concern principle
C. Matching concept
D. Materiality principle
Rationale: The matching concept associates expenses with the
revenues they help produce.
10. What is the primary purpose of accounting?
A. Increase sales
B. Eliminate business risk
C. Provide useful financial information for decision-making
D. Guarantee profitability
Rationale: Accounting provides financial information to internal and
external users for economic decision-making.
, 11. Which user is an internal user of accounting information?
A. Bank lender
B. Government regulator
C. Investor
D. Company manager
Rationale: Managers work inside the organization and use
accounting information to plan, control, and make decisions.
12. Which is an external user of financial statements?
A. Production supervisor
B. Department manager
C. Creditor
D. Store manager
Rationale: Creditors are outside parties that use financial information
to evaluate lending and repayment risk.
13. What does GAAP stand for?
A. Generally Authorized Accounting Procedures
B. Governmental Accounting Analysis Principles
C. Generally Accepted Accounting Principles
D. General Administrative Accounting Practices
Rationale: GAAP refers to the authoritative accounting principles
used for financial reporting in the United States.
14. Which financial statement reports revenues and expenses?
A. Balance sheet
B. Statement of cash flows
C. Income statement
D. Bank reconciliation
Rationale: The income statement summarizes revenues, expenses,
gains, and losses over a period.
