WGU D774 INTRODUCTION TO BUSINESS ACCOUNTING
EXAM COMPLETE QUESTIONS AND 100% VERIFIED
ANSWERS (PASS GUARANTEE)
1. What is the accounting equation?
o Assets = Liabilities + Owner's Equity (or Stockholders' Equity)
2. What is depreciation?
o The systematic allocation of the cost of a tangible fixed asset over
its useful life.
3. What are current liabilities?
o Obligations expected to be paid within one year or the operating
cycle, whichever is longer.
4. What is the revenue recognition principle?
o Revenue should be recognized when it is earned, regardless of
when cash is received.
5. What is FIFO?
o First-In, First-Out; assumes the first items purchased are the first
items sold.
6. What is a journal entry?
o The recording of a transaction in the journal with debits and
credits.
7. What is goodwill?
o The excess of purchase price over fair market value of identifiable
net assets in a business acquisition.
8. What is the current ratio?
, o Current assets divided by current liabilities; measures ability to pay
short-term obligations.
9. What are adjusting entries?
o Journal entries made at the end of an accounting period to update
account balances before preparing financial statements.
10.What is cost of goods sold (COGS)?
o The direct costs of producing or purchasing the goods sold during a
period.
11.What is a debit?
o An entry on the left side of an account; increases assets and
expenses, decreases liabilities, equity, and revenues.
12.What is unearned revenue?
o Cash received before services are performed or goods are
delivered; a liability.
13.What is the matching principle?
o Expenses should be matched with the revenues they help generate
in the same accounting period.
14.What is inventory turnover ratio?
o Cost of goods sold divided by average inventory; measures how
quickly inventory sells.
15.What is the purpose of a trial balance?
o To prove that total debits equal total credits and to help prepare
financial statements.
16.What is straight-line depreciation?
o Depreciation method that allocates equal amounts of expense each
period: (Cost - Salvage) / Useful Life.
17.What are accounts receivable?
o Amounts owed to the company by customers for goods sold or
services provided on credit.
18.What is the face value (par value) of a bond?
, o The principal amount printed on the bond certificate; amount paid
at maturity.
19.What is a credit?
o An entry on the right side of an account; increases liabilities,
equity, and revenues, decreases assets and expenses.
20.What is the allowance method for uncollectible accounts?
o A method that estimates and records bad debt expense in the same
period as sales.
21.What is net income?
o Revenues minus expenses; also called net profit or net earnings.
22.What is the lower of cost or market (LCM) rule?
o Inventory should be reported at the lower of its cost or market
value (replacement cost).
23.What is posting?
o The process of transferring journal entry information to the ledger
accounts.
24.What is a capital expenditure?
o A cost that increases the asset's useful life or efficiency; added to
asset account.
25.What are the four basic financial statements?
o Income Statement, Balance Sheet, Statement of Cash Flows, and
Statement of Owner's Equity (or Statement of Retained Earnings).
26.What is the debt-to-equity ratio?
o Total liabilities divided by total equity; measures financial
leverage.
27.What is accrued expense?
o An expense incurred but not yet paid or recorded.
28.What is LIFO?
o Last-In, First-Out; assumes the last items purchased are the first
items sold.
EXAM COMPLETE QUESTIONS AND 100% VERIFIED
ANSWERS (PASS GUARANTEE)
1. What is the accounting equation?
o Assets = Liabilities + Owner's Equity (or Stockholders' Equity)
2. What is depreciation?
o The systematic allocation of the cost of a tangible fixed asset over
its useful life.
3. What are current liabilities?
o Obligations expected to be paid within one year or the operating
cycle, whichever is longer.
4. What is the revenue recognition principle?
o Revenue should be recognized when it is earned, regardless of
when cash is received.
5. What is FIFO?
o First-In, First-Out; assumes the first items purchased are the first
items sold.
6. What is a journal entry?
o The recording of a transaction in the journal with debits and
credits.
7. What is goodwill?
o The excess of purchase price over fair market value of identifiable
net assets in a business acquisition.
8. What is the current ratio?
, o Current assets divided by current liabilities; measures ability to pay
short-term obligations.
9. What are adjusting entries?
o Journal entries made at the end of an accounting period to update
account balances before preparing financial statements.
10.What is cost of goods sold (COGS)?
o The direct costs of producing or purchasing the goods sold during a
period.
11.What is a debit?
o An entry on the left side of an account; increases assets and
expenses, decreases liabilities, equity, and revenues.
12.What is unearned revenue?
o Cash received before services are performed or goods are
delivered; a liability.
13.What is the matching principle?
o Expenses should be matched with the revenues they help generate
in the same accounting period.
14.What is inventory turnover ratio?
o Cost of goods sold divided by average inventory; measures how
quickly inventory sells.
15.What is the purpose of a trial balance?
o To prove that total debits equal total credits and to help prepare
financial statements.
16.What is straight-line depreciation?
o Depreciation method that allocates equal amounts of expense each
period: (Cost - Salvage) / Useful Life.
17.What are accounts receivable?
o Amounts owed to the company by customers for goods sold or
services provided on credit.
18.What is the face value (par value) of a bond?
, o The principal amount printed on the bond certificate; amount paid
at maturity.
19.What is a credit?
o An entry on the right side of an account; increases liabilities,
equity, and revenues, decreases assets and expenses.
20.What is the allowance method for uncollectible accounts?
o A method that estimates and records bad debt expense in the same
period as sales.
21.What is net income?
o Revenues minus expenses; also called net profit or net earnings.
22.What is the lower of cost or market (LCM) rule?
o Inventory should be reported at the lower of its cost or market
value (replacement cost).
23.What is posting?
o The process of transferring journal entry information to the ledger
accounts.
24.What is a capital expenditure?
o A cost that increases the asset's useful life or efficiency; added to
asset account.
25.What are the four basic financial statements?
o Income Statement, Balance Sheet, Statement of Cash Flows, and
Statement of Owner's Equity (or Statement of Retained Earnings).
26.What is the debt-to-equity ratio?
o Total liabilities divided by total equity; measures financial
leverage.
27.What is accrued expense?
o An expense incurred but not yet paid or recorded.
28.What is LIFO?
o Last-In, First-Out; assumes the last items purchased are the first
items sold.
