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WGU D774 Introduction to Business Accounting
ACTUAL EXAM QUESTIONS AND ANSWERS
2026/2027 | Objective Assessment OA | Pass
Guaranteed - A+ Graded
Aligned with WGU Competencies | The Accounting Cycle & Financial Analysis
Domain 1: The Accounting Equation & Transaction Analysis (20%)
Q1: A company purchases office supplies for $500 cash. The effect on the accounting equation
is:
A. Assets increase $500; Liabilities increase $500.
B. Assets increase $500; Equity increases $500.
C. Assets decrease $500; Assets increase $500. (Net effect on Assets = $0) [CORRECT]
D. Assets decrease $500; Expenses increase $500.
Correct Answer: C
Rationale: The transaction involves exchanging one asset for another. Cash (an asset) decreases
by $500. Office Supplies (an asset) increases by $500. There is no change to liabilities or equity
at the time of purchase. The expense is recognized when the supplies are used, not when
purchased.
Q2: A business owner invests $25,000 of personal cash into the company. The effect on the
accounting equation is:
A. Assets increase $25,000; Liabilities increase $25,000.
B. Assets increase $25,000; Equity increases $25,000. [CORRECT]
C. Assets increase $25,000; Revenue increases $25,000.
D. Equity increases $25,000; Revenue increases $25,000.
Correct Answer: B
Rationale: An owner's investment (contribution of capital) increases Cash (Asset) by $25,000
and increases Owner's Equity by $25,000. This is not revenue because it is not earned from
operations; it is a capital contribution recorded in a separate equity account (e.g., "Owner,
Capital").
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Q3: A company borrows $10,000 from a bank by signing a 6-month note payable. The effect on
the accounting equation is:
A. Assets increase $10,000; Liabilities increase $10,000. [CORRECT]
B. Assets increase $10,000; Equity increases $10,000.
C. Assets increase $10,000; Revenue increases $10,000.
D. Cash increases $10,000; Expenses increase $10,000.
Correct Answer: A
Rationale: Borrowing money creates an increase in Cash (Asset) of $10,000 and an increase in
Notes Payable (Liability) of $10,000. Loans are liabilities, not revenue, because they must be
repaid. There is no immediate effect on equity.
Q4: A company provides services to a customer and bills them $3,000 on account (the customer
will pay later). The effect on the accounting equation is:
A. Assets increase $3,000; Liabilities increase $3,000.
B. Assets increase $3,000; Equity increases $3,000. [CORRECT]
C. Assets decrease $3,000; Equity decreases $3,000.
D. Liabilities decrease $3,000; Equity increases $3,000.
Correct Answer: B
Rationale: This is revenue earned on account. Accounts Receivable (Asset) increases by $3,000,
and Service Revenue increases Equity by $3,000 (revenues increase equity). Under the revenue
recognition principle, revenue is recorded when earned, regardless of when cash is received.
Q5: A company pays $2,000 cash for employee salaries earned during the current month. The
effect on the accounting equation is:
A. Assets decrease $2,000; Liabilities decrease $2,000.
B. Assets decrease $2,000; Equity decreases $2,000. [CORRECT]
C. Assets decrease $2,000; Expenses decrease $2,000.
D. Liabilities increase $2,000; Equity decreases $2,000.
Correct Answer: B
Rationale: Cash (Asset) decreases by $2,000. Salaries Expense reduces Equity by $2,000
because expenses decrease net income, which decreases retained earnings (part of equity). This
follows the matching principle—expenses are recorded when incurred.
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Q6: Which of the following transactions would cause both total assets and total liabilities to
decrease?
A. Purchasing equipment for cash.
B. Paying off an accounts payable with cash.
C. Collecting cash from accounts receivable.
D. Paying off a note payable with cash. [CORRECT]
Correct Answer: D
Rationale: When paying off a note payable: Cash (Asset) decreases and Notes Payable (Liability)
decreases. Option B also decreases both, but the question asks for the best answer. Paying a note
payable is a more significant liability reduction. (Note: Both B and D are technically correct, but
D represents a formal debt instrument, making it the stronger answer for liability decrease.)
Q7: [Select ALL that apply] Which of the following accounts are increased with a DEBIT?
A. Cash [CORRECT]
B. Supplies [CORRECT]
C. Accounts Payable
D. Equipment [CORRECT]
E. Owner's Capital
Correct Answers: A, B, D
Rationale: Assets have normal DEBIT balances and are increased with debits. Liabilities and
Equity have normal CREDIT balances and are increased with credits. Cash, Supplies, and
Equipment are all asset accounts.
Q8: A company has the following account balances: Assets = $80,000, Liabilities = $30,000.
What is the amount of Owner's Equity?
A. $50,000 [CORRECT]
B. $110,000
C. $30,000
D. Cannot be determined from the information given.
Correct Answer: A
Rationale: Using the accounting equation: Assets = Liabilities + Owner's Equity. Therefore:
$80,000 = $30,000 + Owner's Equity. Solving for Owner's Equity: $80,000 - $30,000 = $50,000.
WGU D774 Introduction to Business Accounting
ACTUAL EXAM QUESTIONS AND ANSWERS
2026/2027 | Objective Assessment OA | Pass
Guaranteed - A+ Graded
Aligned with WGU Competencies | The Accounting Cycle & Financial Analysis
Domain 1: The Accounting Equation & Transaction Analysis (20%)
Q1: A company purchases office supplies for $500 cash. The effect on the accounting equation
is:
A. Assets increase $500; Liabilities increase $500.
B. Assets increase $500; Equity increases $500.
C. Assets decrease $500; Assets increase $500. (Net effect on Assets = $0) [CORRECT]
D. Assets decrease $500; Expenses increase $500.
Correct Answer: C
Rationale: The transaction involves exchanging one asset for another. Cash (an asset) decreases
by $500. Office Supplies (an asset) increases by $500. There is no change to liabilities or equity
at the time of purchase. The expense is recognized when the supplies are used, not when
purchased.
Q2: A business owner invests $25,000 of personal cash into the company. The effect on the
accounting equation is:
A. Assets increase $25,000; Liabilities increase $25,000.
B. Assets increase $25,000; Equity increases $25,000. [CORRECT]
C. Assets increase $25,000; Revenue increases $25,000.
D. Equity increases $25,000; Revenue increases $25,000.
Correct Answer: B
Rationale: An owner's investment (contribution of capital) increases Cash (Asset) by $25,000
and increases Owner's Equity by $25,000. This is not revenue because it is not earned from
operations; it is a capital contribution recorded in a separate equity account (e.g., "Owner,
Capital").
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Q3: A company borrows $10,000 from a bank by signing a 6-month note payable. The effect on
the accounting equation is:
A. Assets increase $10,000; Liabilities increase $10,000. [CORRECT]
B. Assets increase $10,000; Equity increases $10,000.
C. Assets increase $10,000; Revenue increases $10,000.
D. Cash increases $10,000; Expenses increase $10,000.
Correct Answer: A
Rationale: Borrowing money creates an increase in Cash (Asset) of $10,000 and an increase in
Notes Payable (Liability) of $10,000. Loans are liabilities, not revenue, because they must be
repaid. There is no immediate effect on equity.
Q4: A company provides services to a customer and bills them $3,000 on account (the customer
will pay later). The effect on the accounting equation is:
A. Assets increase $3,000; Liabilities increase $3,000.
B. Assets increase $3,000; Equity increases $3,000. [CORRECT]
C. Assets decrease $3,000; Equity decreases $3,000.
D. Liabilities decrease $3,000; Equity increases $3,000.
Correct Answer: B
Rationale: This is revenue earned on account. Accounts Receivable (Asset) increases by $3,000,
and Service Revenue increases Equity by $3,000 (revenues increase equity). Under the revenue
recognition principle, revenue is recorded when earned, regardless of when cash is received.
Q5: A company pays $2,000 cash for employee salaries earned during the current month. The
effect on the accounting equation is:
A. Assets decrease $2,000; Liabilities decrease $2,000.
B. Assets decrease $2,000; Equity decreases $2,000. [CORRECT]
C. Assets decrease $2,000; Expenses decrease $2,000.
D. Liabilities increase $2,000; Equity decreases $2,000.
Correct Answer: B
Rationale: Cash (Asset) decreases by $2,000. Salaries Expense reduces Equity by $2,000
because expenses decrease net income, which decreases retained earnings (part of equity). This
follows the matching principle—expenses are recorded when incurred.
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Q6: Which of the following transactions would cause both total assets and total liabilities to
decrease?
A. Purchasing equipment for cash.
B. Paying off an accounts payable with cash.
C. Collecting cash from accounts receivable.
D. Paying off a note payable with cash. [CORRECT]
Correct Answer: D
Rationale: When paying off a note payable: Cash (Asset) decreases and Notes Payable (Liability)
decreases. Option B also decreases both, but the question asks for the best answer. Paying a note
payable is a more significant liability reduction. (Note: Both B and D are technically correct, but
D represents a formal debt instrument, making it the stronger answer for liability decrease.)
Q7: [Select ALL that apply] Which of the following accounts are increased with a DEBIT?
A. Cash [CORRECT]
B. Supplies [CORRECT]
C. Accounts Payable
D. Equipment [CORRECT]
E. Owner's Capital
Correct Answers: A, B, D
Rationale: Assets have normal DEBIT balances and are increased with debits. Liabilities and
Equity have normal CREDIT balances and are increased with credits. Cash, Supplies, and
Equipment are all asset accounts.
Q8: A company has the following account balances: Assets = $80,000, Liabilities = $30,000.
What is the amount of Owner's Equity?
A. $50,000 [CORRECT]
B. $110,000
C. $30,000
D. Cannot be determined from the information given.
Correct Answer: A
Rationale: Using the accounting equation: Assets = Liabilities + Owner's Equity. Therefore:
$80,000 = $30,000 + Owner's Equity. Solving for Owner's Equity: $80,000 - $30,000 = $50,000.
