WGU Introduction to Business Accounting
Objective Assessment (OA) Exam Bank & Study Guide
Complete A+ Verified Questions & Answers
SECTION 1: THE ACCOUNTING EQUATION & BASIC CONCEPTS
**1. Which of the following is the correct accounting equation?**
A) Assets = Liabilities - Equity
B) Assets = Liabilities + Equity
C) Assets + Liabilities = Equity
D) Liabilities = Assets + Equity
**Answer: B) Assets = Liabilities + Equity**
**Rationale:** This is the foundation of double - entry accounting.
Everything the company owns (Assets) is either financed by borrowing
(Liabilities) or by the owners' investments and profits (Equity).
**2. A company purchases a building by paying $50,000 in cash and signing
a $150,000 mortgage note. What is the net effect on the accounting
equation?**
A) Assets increase by $200,000; Liabilities increase by $200,000.
B) Assets increase by $150,000; Liabilities increase by $150,000.
,C) Assets increase by $200,000; Assets decrease by $50,000; Liabilities
increase by $150,000. (Net effect: +$150,000 on both sides).
D) No effect, because cash was used.
**Answer: C) Assets increase by $200,000; Assets decrease by $50,000;
Liabilities increase by $150,000.**
**Rationale:** The building (Asset) increases by $200,000. Cash (Asset)
decreases by $50,000. The mortgage (Liability) increases by $150,000. The
equation remains in balance because Total Assets increased by $150,000
and Total Liabiliti es increased by $150,000.
**3. Which of the following accounts is considered a "contra - asset"?**
A) Accounts Payable
B) Accumulated Depreciation
C) Common Stock
D) Service Revenue
**Answer: B) Accumulated Depreciation**
**Rationale:** A contra - asset account is paired with an asset account and
carries a normal *debit* balance (opposite of a normal asset). It reduces
the book value of the asset (e.g., Accumulated Depreciation reduces the
value of Equipment).
**4. A company receives $3,000 from a customer for services to be
performed next month. How should this be recorded?**
A) Debit Cash $3,000; Credit Service Revenue $3,000.
B) Debit Unearned Revenue $3,000; Credit Cash $3,000.
C) Debit Cash $3,000; Credit Unearned Revenu e $3,000.
, D) Debit Accounts Receivable $3,000; Credit Service Revenue $3,000.
**Answer: C) Debit Cash $3,000; Credit Unearned Revenue $3,000.**
**Rationale:** Because the service has not been performed yet, the
company has an obligation (a liability) to perform that service in the future.
This is recorded as a liability called Unearned Revenue. Cash is an asset
that increased.
---
# SECTION 2: DEBITS, CREDITS, & THE GENERAL LEDGER
**5. What is the normal balance of a liability account?**
A) Debit
B) Credit
C) It d epends on the specific liability.
D) Neither; liabilities do not have normal balances.
**Answer: B) Credit**
**Rationale:** The normal balance is the side that increases the account.
Assets and Expenses increase with Debits. Liabilities, Equity, and
Revenues increase with Credits.
**6. Which of the following statements about debits and credits is TRUE?**
A) Debits always increase accounts.
B) Credits always decrease accounts.
Objective Assessment (OA) Exam Bank & Study Guide
Complete A+ Verified Questions & Answers
SECTION 1: THE ACCOUNTING EQUATION & BASIC CONCEPTS
**1. Which of the following is the correct accounting equation?**
A) Assets = Liabilities - Equity
B) Assets = Liabilities + Equity
C) Assets + Liabilities = Equity
D) Liabilities = Assets + Equity
**Answer: B) Assets = Liabilities + Equity**
**Rationale:** This is the foundation of double - entry accounting.
Everything the company owns (Assets) is either financed by borrowing
(Liabilities) or by the owners' investments and profits (Equity).
**2. A company purchases a building by paying $50,000 in cash and signing
a $150,000 mortgage note. What is the net effect on the accounting
equation?**
A) Assets increase by $200,000; Liabilities increase by $200,000.
B) Assets increase by $150,000; Liabilities increase by $150,000.
,C) Assets increase by $200,000; Assets decrease by $50,000; Liabilities
increase by $150,000. (Net effect: +$150,000 on both sides).
D) No effect, because cash was used.
**Answer: C) Assets increase by $200,000; Assets decrease by $50,000;
Liabilities increase by $150,000.**
**Rationale:** The building (Asset) increases by $200,000. Cash (Asset)
decreases by $50,000. The mortgage (Liability) increases by $150,000. The
equation remains in balance because Total Assets increased by $150,000
and Total Liabiliti es increased by $150,000.
**3. Which of the following accounts is considered a "contra - asset"?**
A) Accounts Payable
B) Accumulated Depreciation
C) Common Stock
D) Service Revenue
**Answer: B) Accumulated Depreciation**
**Rationale:** A contra - asset account is paired with an asset account and
carries a normal *debit* balance (opposite of a normal asset). It reduces
the book value of the asset (e.g., Accumulated Depreciation reduces the
value of Equipment).
**4. A company receives $3,000 from a customer for services to be
performed next month. How should this be recorded?**
A) Debit Cash $3,000; Credit Service Revenue $3,000.
B) Debit Unearned Revenue $3,000; Credit Cash $3,000.
C) Debit Cash $3,000; Credit Unearned Revenu e $3,000.
, D) Debit Accounts Receivable $3,000; Credit Service Revenue $3,000.
**Answer: C) Debit Cash $3,000; Credit Unearned Revenue $3,000.**
**Rationale:** Because the service has not been performed yet, the
company has an obligation (a liability) to perform that service in the future.
This is recorded as a liability called Unearned Revenue. Cash is an asset
that increased.
---
# SECTION 2: DEBITS, CREDITS, & THE GENERAL LEDGER
**5. What is the normal balance of a liability account?**
A) Debit
B) Credit
C) It d epends on the specific liability.
D) Neither; liabilities do not have normal balances.
**Answer: B) Credit**
**Rationale:** The normal balance is the side that increases the account.
Assets and Expenses increase with Debits. Liabilities, Equity, and
Revenues increase with Credits.
**6. Which of the following statements about debits and credits is TRUE?**
A) Debits always increase accounts.
B) Credits always decrease accounts.
