WGU D196 UPDATED Exam Questions and
CORRECT Answers
What is the correct sequence of budgets in a manufacturing business? - CORRECT
ANSWER - Sales, production, direct materials
What is the effect of a company's accounting department maintaining high ethical standards? -
CORRECT ANSWER - The company's accounting information will increase in value.
Why might employees be interested in their company's financial accounting information? -
CORRECT ANSWER - Financial statement data are often used in determining employee
bonuses.
Which group establishes financial accounting rules in the United States? - CORRECT
ANSWER - Financial Accounting Standards Board (FASB)
Which report is one of the three primary financial statements? - CORRECT ANSWER -
Statement of cash flows
A company paid $5,000 cash in advertising costs.
How does this transaction affect the paying company's accounting equation? - CORRECT
ANSWER - Assets increase by $5,000; expenses increase by $5,000.
A company borrowed $80,000 cash from a bank. - CORRECT ANSWER - Assets increase
by $80,000; liabilities increase by $80,000.
What is the impact of expenses on the accounting equation? - CORRECT ANSWER -
Expenses decrease owners' equity.
Which type of account are accounts payable and notes payable both examples of? - CORRECT
ANSWER - Liability
, What is the purpose of the financial accounting cycle? - CORRECT ANSWER - To gather
information related to the expenses and income generated by a company
According to the accounting equation, the amount of liabilities and equity must always be equal
to another amount.
What is that other amount? - CORRECT ANSWER - Assets
Which item is an expense item? - CORRECT ANSWER - Cost of goods sold
How is gross profit computed? - CORRECT ANSWER - Sales minus cost of goods sold
Which type of account is retained earnings? - CORRECT ANSWER - Equity
For purposes of cash flow classification in the statement of cash flows, which item is an
operating activity? - CORRECT ANSWER - Paying Employees
How does a classified balance sheet provide useful information to a decision maker? -
CORRECT ANSWER - It distinguishes between current and long-term assets
What information does a balance sheet provide to a decision maker? - CORRECT
ANSWER - Summary of the financial position of a company at a particular date
What is an account payable? - CORRECT ANSWER - The amount owed by a company
that purchased goods or services from a supplier on credit
Why is the net cash for December negative while total sales for December are the highest out of
the months from October through December? - CORRECT ANSWER - Total cash
available does not reflect December sales because there was a high volume of credit sales.
CORRECT Answers
What is the correct sequence of budgets in a manufacturing business? - CORRECT
ANSWER - Sales, production, direct materials
What is the effect of a company's accounting department maintaining high ethical standards? -
CORRECT ANSWER - The company's accounting information will increase in value.
Why might employees be interested in their company's financial accounting information? -
CORRECT ANSWER - Financial statement data are often used in determining employee
bonuses.
Which group establishes financial accounting rules in the United States? - CORRECT
ANSWER - Financial Accounting Standards Board (FASB)
Which report is one of the three primary financial statements? - CORRECT ANSWER -
Statement of cash flows
A company paid $5,000 cash in advertising costs.
How does this transaction affect the paying company's accounting equation? - CORRECT
ANSWER - Assets increase by $5,000; expenses increase by $5,000.
A company borrowed $80,000 cash from a bank. - CORRECT ANSWER - Assets increase
by $80,000; liabilities increase by $80,000.
What is the impact of expenses on the accounting equation? - CORRECT ANSWER -
Expenses decrease owners' equity.
Which type of account are accounts payable and notes payable both examples of? - CORRECT
ANSWER - Liability
, What is the purpose of the financial accounting cycle? - CORRECT ANSWER - To gather
information related to the expenses and income generated by a company
According to the accounting equation, the amount of liabilities and equity must always be equal
to another amount.
What is that other amount? - CORRECT ANSWER - Assets
Which item is an expense item? - CORRECT ANSWER - Cost of goods sold
How is gross profit computed? - CORRECT ANSWER - Sales minus cost of goods sold
Which type of account is retained earnings? - CORRECT ANSWER - Equity
For purposes of cash flow classification in the statement of cash flows, which item is an
operating activity? - CORRECT ANSWER - Paying Employees
How does a classified balance sheet provide useful information to a decision maker? -
CORRECT ANSWER - It distinguishes between current and long-term assets
What information does a balance sheet provide to a decision maker? - CORRECT
ANSWER - Summary of the financial position of a company at a particular date
What is an account payable? - CORRECT ANSWER - The amount owed by a company
that purchased goods or services from a supplier on credit
Why is the net cash for December negative while total sales for December are the highest out of
the months from October through December? - CORRECT ANSWER - Total cash
available does not reflect December sales because there was a high volume of credit sales.
