WGU d196,,, Questions with Correct Answers (Grade A+)
Question 1: What is a transaction?
Answer: Two parties exchanging something of value
Question 2: What is the effect of a company's accounting department maintaining high ethical
standards?
Answer: The company's accounting information will increase in value.
Question 3: Why might employees be interested in their company's financial accounting information?
Answer: Financial statement data are often used in determining employee bonuses.
Question 4: Which group establishes financial accounting rules in the United States?
Answer: financial Accounting Standards Board (FASB)
Question 5: Which report is one of the three primary financial statements?
Answer: Assets decrease by $5,000; expenses increase by $5,000
Question 6: A company borrowed $80,000 cash from a bank. How does this transaction affect the
accounting equation of the borrowing company?
Answer: Assets increase by $80,000; liabilities increase by $80,000.
Question 7: A company paid $5,000 cash in advertising costs. How does this transaction affect the
paying company's accounting equation?
Answer: Assets decrease by $5,000; expenses increase by $5,000.
Question 8: What is the impact of expenses on the accounting equation?
Answer: Expenses decrease owners' equity.
Question 9: Which type of account are accounts payable and notes payable both examples of?
Answer: Liability
Question 10: What is the purpose of the financial accounting cycle?
Answer: To turn information about transactions into financial statements
Page 1
, Question 11: According to the accounting equation, the amount of liabilities and equity must always be
equal to another amount. What is that other amount?
Answer: Assets
Question 12: Which item is an expense item?
Answer: Cost of goods sold
Question 13: How is gross profit computed?
Answer: Sales minus cost of goods sold
Question 14: Which type of account is retained earnings?
Answer: Equity
Question 15: For purposes of cash flow classification in the statement of cash flows, which item is an
operating activity?
Answer: Paying employees
Question 16: How does a classified balance sheet provide useful information to a decision maker?
Answer: It distinguishes between current and long-term assets.
Question 17: What information does a balance sheet provide to a decision maker?
Answer: Summary of the financial position of a company at a particular date
Question 18: What is an account payable?
Answer: The amount owed by a company that purchased goods or services from a supplier on credit
Question 19: Based on your analysis, what should management be concerned about?
Answer: The increase in operating expenses over the past two years
Question 20: Which action would make the profitability of the company in 20X9 the same as in 20X7?
Answer: Increasing the proportion of gross profit to sales by about 2%
Page 2
Question 1: What is a transaction?
Answer: Two parties exchanging something of value
Question 2: What is the effect of a company's accounting department maintaining high ethical
standards?
Answer: The company's accounting information will increase in value.
Question 3: Why might employees be interested in their company's financial accounting information?
Answer: Financial statement data are often used in determining employee bonuses.
Question 4: Which group establishes financial accounting rules in the United States?
Answer: financial Accounting Standards Board (FASB)
Question 5: Which report is one of the three primary financial statements?
Answer: Assets decrease by $5,000; expenses increase by $5,000
Question 6: A company borrowed $80,000 cash from a bank. How does this transaction affect the
accounting equation of the borrowing company?
Answer: Assets increase by $80,000; liabilities increase by $80,000.
Question 7: A company paid $5,000 cash in advertising costs. How does this transaction affect the
paying company's accounting equation?
Answer: Assets decrease by $5,000; expenses increase by $5,000.
Question 8: What is the impact of expenses on the accounting equation?
Answer: Expenses decrease owners' equity.
Question 9: Which type of account are accounts payable and notes payable both examples of?
Answer: Liability
Question 10: What is the purpose of the financial accounting cycle?
Answer: To turn information about transactions into financial statements
Page 1
, Question 11: According to the accounting equation, the amount of liabilities and equity must always be
equal to another amount. What is that other amount?
Answer: Assets
Question 12: Which item is an expense item?
Answer: Cost of goods sold
Question 13: How is gross profit computed?
Answer: Sales minus cost of goods sold
Question 14: Which type of account is retained earnings?
Answer: Equity
Question 15: For purposes of cash flow classification in the statement of cash flows, which item is an
operating activity?
Answer: Paying employees
Question 16: How does a classified balance sheet provide useful information to a decision maker?
Answer: It distinguishes between current and long-term assets.
Question 17: What information does a balance sheet provide to a decision maker?
Answer: Summary of the financial position of a company at a particular date
Question 18: What is an account payable?
Answer: The amount owed by a company that purchased goods or services from a supplier on credit
Question 19: Based on your analysis, what should management be concerned about?
Answer: The increase in operating expenses over the past two years
Question 20: Which action would make the profitability of the company in 20X9 the same as in 20X7?
Answer: Increasing the proportion of gross profit to sales by about 2%
Page 2
