Wall Street Prep Accounting Crash Course Exam
Questions And Correct Answers (Verified Answers) Plus
Rationales 2025/2026 Q&A | Instant Download Pdf
1. Which of the following statements is most accurate regarding the matching
principle?
A. Revenues are recognized when cash is received
B. Expenses should be recognized in the same period as the revenues they help
generate
C. Revenues are recorded only after all expenses are incurred
D. Assets and liabilities must always match
The matching principle ensures that expenses are recognized in the same period
as the revenues they contribute to, providing an accurate picture of profitability.
2. Which financial statement shows a company’s financial position at a point
in time?
A. Income Statement
B. Statement of Cash Flows
C. Balance Sheet
D. Retained Earnings Statement
The balance sheet provides a snapshot of the company’s assets, liabilities, and
equity at a specific point in time.
, 3. Which of the following is a non-cash expense?
A. Cost of goods sold
B. Depreciation
C. Salaries and wages
D. Interest expense
Depreciation reduces the value of assets over time and appears on the income
statement, but does not involve a cash outflow in the current period.
4. What does EBITDA stand for?
A. Earnings Before Interest, Debt, Taxes, and Assets
B. Earnings Before Interest, Taxes, Depreciation, and Amortization
C. Earnings Before Inventory Turnover, Depreciation, and Amortization
D. Earnings Before Investments, Taxes, Debt, and Assets
EBITDA is a measure of a company’s operational profitability, excluding
financing and accounting decisions.
5. An increase in accounts receivable is considered what type of cash flow
activity?
A. Operating inflow
B. Operating outflow
C. Decrease in operating cash flow
D. Investing inflow
,An increase in accounts receivable means more revenue was recognized but not
yet collected, reducing operating cash flow.
6. What is the primary purpose of the cash flow statement?
A. To show the company’s profitability
B. To summarize all financial activity over the fiscal year
C. To show cash inflows and outflows from operations, investing, and financing
D. To reconcile net income with retained earnings
The cash flow statement explains how cash is generated and used in operating,
investing, and financing activities.
7. What is working capital?
A. Cash + Marketable Securities
B. Total Assets - Total Liabilities
C. Current Assets - Current Liabilities
D. Equity - Liabilities
Working capital measures a company’s short-term liquidity and operational
efficiency.
8. What happens to net income if depreciation expense increases?
A. It increases
B. It decreases
, C. It remains unchanged
D. It depends on the company's tax rate
Depreciation is an expense; increasing it reduces net income.
9. If a company issues new debt, where is it recorded on the cash flow
statement?
A. Operating activities
B. Investing activities
C. Financing activities
D. Notes to the financials
Issuing debt brings in cash and is recorded as a financing inflow.
10.Which of the following transactions increases equity?
A. Purchasing equipment
B. Issuing common stock
C. Paying dividends
D. Buying back stock
Issuing common stock brings in cash and increases shareholder equity.
11.What is the accounting equation?
A. Assets = Revenue - Expenses
B. Assets + Liabilities = Equity
Questions And Correct Answers (Verified Answers) Plus
Rationales 2025/2026 Q&A | Instant Download Pdf
1. Which of the following statements is most accurate regarding the matching
principle?
A. Revenues are recognized when cash is received
B. Expenses should be recognized in the same period as the revenues they help
generate
C. Revenues are recorded only after all expenses are incurred
D. Assets and liabilities must always match
The matching principle ensures that expenses are recognized in the same period
as the revenues they contribute to, providing an accurate picture of profitability.
2. Which financial statement shows a company’s financial position at a point
in time?
A. Income Statement
B. Statement of Cash Flows
C. Balance Sheet
D. Retained Earnings Statement
The balance sheet provides a snapshot of the company’s assets, liabilities, and
equity at a specific point in time.
, 3. Which of the following is a non-cash expense?
A. Cost of goods sold
B. Depreciation
C. Salaries and wages
D. Interest expense
Depreciation reduces the value of assets over time and appears on the income
statement, but does not involve a cash outflow in the current period.
4. What does EBITDA stand for?
A. Earnings Before Interest, Debt, Taxes, and Assets
B. Earnings Before Interest, Taxes, Depreciation, and Amortization
C. Earnings Before Inventory Turnover, Depreciation, and Amortization
D. Earnings Before Investments, Taxes, Debt, and Assets
EBITDA is a measure of a company’s operational profitability, excluding
financing and accounting decisions.
5. An increase in accounts receivable is considered what type of cash flow
activity?
A. Operating inflow
B. Operating outflow
C. Decrease in operating cash flow
D. Investing inflow
,An increase in accounts receivable means more revenue was recognized but not
yet collected, reducing operating cash flow.
6. What is the primary purpose of the cash flow statement?
A. To show the company’s profitability
B. To summarize all financial activity over the fiscal year
C. To show cash inflows and outflows from operations, investing, and financing
D. To reconcile net income with retained earnings
The cash flow statement explains how cash is generated and used in operating,
investing, and financing activities.
7. What is working capital?
A. Cash + Marketable Securities
B. Total Assets - Total Liabilities
C. Current Assets - Current Liabilities
D. Equity - Liabilities
Working capital measures a company’s short-term liquidity and operational
efficiency.
8. What happens to net income if depreciation expense increases?
A. It increases
B. It decreases
, C. It remains unchanged
D. It depends on the company's tax rate
Depreciation is an expense; increasing it reduces net income.
9. If a company issues new debt, where is it recorded on the cash flow
statement?
A. Operating activities
B. Investing activities
C. Financing activities
D. Notes to the financials
Issuing debt brings in cash and is recorded as a financing inflow.
10.Which of the following transactions increases equity?
A. Purchasing equipment
B. Issuing common stock
C. Paying dividends
D. Buying back stock
Issuing common stock brings in cash and increases shareholder equity.
11.What is the accounting equation?
A. Assets = Revenue - Expenses
B. Assets + Liabilities = Equity
