WGU D774 – Introduction to Business Accounting Objective
Assessment (OA) Practice Exam | Questions and Answers |
2026/27 Updates | 100% correct
1. What is the primary purpose of accounting?
A. To prepare tax returns for government agencies
B. To provide financial information for decision-making by stakeholders
C. To ensure a company never experiences a net loss
D. To track only cash transactions and ignore credit sales
Correct Answer: B
Rationale: Accounting identifies, records, and communicates financial information to
help stakeholders—including managers, investors, and creditors—make informed
business decisions. Options A, C, and D are too narrow or incorrect; accounting serves
broader purposes beyond tax preparation, cannot prevent losses, and tracks all
transactions (accrual basis), not just cash.
2. In which country was the double-entry accounting system developed in the 15th
century?
A. France
B. Italy
C. England
D. Germany
Correct Answer: B
Rationale: The double-entry bookkeeping system was first documented by Luca Pacioli,
an Italian mathematician, in 1494. This system records both debits and credits to keep
,the accounting equation balanced. The other countries were not the origin point of this
system.
3. Which organization is responsible for setting financial accounting and reporting
standards for US businesses that use Generally Accepted Accounting Principles (GAAP)?
A. Securities and Exchange Commission (SEC)
B. Financial Accounting Standards Board (FASB)
C. Public Company Accounting Oversight Board (PCAOB)
D. American Institute of CPAs (AICPA)
Correct Answer: B
Rationale: The FASB is the designated private-sector organization that establishes
GAAP for both public and private companies. The SEC oversees but does not create
standards; the PCAOB oversees audits; the AICPA represents the accounting profession.
4. What was the regulatory outcome of accounting scandals such as Enron, WorldCom,
and Tyco?
A. Creation of GAAP
B. Introduction of the Sarbanes-Oxley Act (SOX)
C. Establishment of the SEC
D. Removal of audit requirements for private companies
Correct Answer: B
Rationale: The Sarbanes-Oxley Act of 2002 was enacted to enhance corporate
governance, financial disclosures, and internal controls following these major scandals.
GAAP predates these events; the SEC was established after the 1929 crash.
5. What does the accounting equation state?
A. Assets = Liabilities – Equity
B. Assets = Liabilities + Equity
, C. Liabilities = Assets + Equity
D. Equity = Assets + Liabilities
Correct Answer: B
Rationale: The fundamental accounting equation is Assets = Liabilities + Equity. This
must always remain in balance after every transaction. The other options present
mathematically incorrect relationships.
6. If a company has assets of $150,000 and liabilities of $80,000, what is the owner‘s
equity?
A. $70,000
B. $80,000
C. $150,000
D. $230,000
Correct Answer: A
Rationale: Owner’s equity = Assets – Liabilities = $150,000 – $80,000 = $70,000. Option
D incorrectly adds instead of subtracts; options B and C misidentify equity as equal to
liabilities or assets alone.
7. What type of account is “Accounts Receivable”?
A. Liability
B. Asset
C. Equity
D. Expense
Correct Answer: B
Rationale: Accounts Receivable represents money owed to the company by customers
for goods or services sold on credit. It is a current asset expected to be collected within
one year.
Assessment (OA) Practice Exam | Questions and Answers |
2026/27 Updates | 100% correct
1. What is the primary purpose of accounting?
A. To prepare tax returns for government agencies
B. To provide financial information for decision-making by stakeholders
C. To ensure a company never experiences a net loss
D. To track only cash transactions and ignore credit sales
Correct Answer: B
Rationale: Accounting identifies, records, and communicates financial information to
help stakeholders—including managers, investors, and creditors—make informed
business decisions. Options A, C, and D are too narrow or incorrect; accounting serves
broader purposes beyond tax preparation, cannot prevent losses, and tracks all
transactions (accrual basis), not just cash.
2. In which country was the double-entry accounting system developed in the 15th
century?
A. France
B. Italy
C. England
D. Germany
Correct Answer: B
Rationale: The double-entry bookkeeping system was first documented by Luca Pacioli,
an Italian mathematician, in 1494. This system records both debits and credits to keep
,the accounting equation balanced. The other countries were not the origin point of this
system.
3. Which organization is responsible for setting financial accounting and reporting
standards for US businesses that use Generally Accepted Accounting Principles (GAAP)?
A. Securities and Exchange Commission (SEC)
B. Financial Accounting Standards Board (FASB)
C. Public Company Accounting Oversight Board (PCAOB)
D. American Institute of CPAs (AICPA)
Correct Answer: B
Rationale: The FASB is the designated private-sector organization that establishes
GAAP for both public and private companies. The SEC oversees but does not create
standards; the PCAOB oversees audits; the AICPA represents the accounting profession.
4. What was the regulatory outcome of accounting scandals such as Enron, WorldCom,
and Tyco?
A. Creation of GAAP
B. Introduction of the Sarbanes-Oxley Act (SOX)
C. Establishment of the SEC
D. Removal of audit requirements for private companies
Correct Answer: B
Rationale: The Sarbanes-Oxley Act of 2002 was enacted to enhance corporate
governance, financial disclosures, and internal controls following these major scandals.
GAAP predates these events; the SEC was established after the 1929 crash.
5. What does the accounting equation state?
A. Assets = Liabilities – Equity
B. Assets = Liabilities + Equity
, C. Liabilities = Assets + Equity
D. Equity = Assets + Liabilities
Correct Answer: B
Rationale: The fundamental accounting equation is Assets = Liabilities + Equity. This
must always remain in balance after every transaction. The other options present
mathematically incorrect relationships.
6. If a company has assets of $150,000 and liabilities of $80,000, what is the owner‘s
equity?
A. $70,000
B. $80,000
C. $150,000
D. $230,000
Correct Answer: A
Rationale: Owner’s equity = Assets – Liabilities = $150,000 – $80,000 = $70,000. Option
D incorrectly adds instead of subtracts; options B and C misidentify equity as equal to
liabilities or assets alone.
7. What type of account is “Accounts Receivable”?
A. Liability
B. Asset
C. Equity
D. Expense
Correct Answer: B
Rationale: Accounts Receivable represents money owed to the company by customers
for goods or services sold on credit. It is a current asset expected to be collected within
one year.
