Page 1 of 56
WGU D774 OBJECTIVE ASSESSMENT 2
(INTRODUCTION TO BUSINESS ACCOUNTING)
2026 PRACTICE EXAM COMPLETE (150)
CURRENT TESTING QUESTIONS AND
CORRECT ANSWERS WITH DETAILED
EXPLANATIONS|GUARANTEED PASS.
WGU D774
Prepare for the WGU D774 Objective Assessment 2 (Introduction to
Business Accounting) Practice Exam with questions covering
accounting principles, financial statements, bookkeeping, assets and
liabilities, journal entries, and business accounting concepts. This
study guide helps reinforce essential accounting knowledge and
supports effective objective assessment preparation. Designed to
improve analytical skills and boost confidence in introductory business
accounting coursework. Suitable for business, finance, and WGU
students.
MULTIPLE CHOICE.
Part 1: Foundational Accounting Concepts & Principles (Qs 1-25)
1. What is the primary purpose of financial accounting?
A) To forecast future sales and create internal budgets
B) To provide standardized financial information to external users like investors and
creditors
C) To calculate tax liabilities for government agencies
D) To track the daily cash flow for operational management
Answer: B
Rationale: Financial accounting focuses on creating standardized reports (financial
statements) for external stakeholders. Internal budgeting (A) and operational tracking (D)
are roles of managerial accounting. Tax calculation (C) is a specialized function.
, Page 2 of 56
2. Which of the following best describes the role of the Financial Accounting
Standards Board (FASB)?
A) To oversee the audits of public companies and protect investors
B) To regulate the stock exchanges where company shares are traded
C) To establish and improve the Generally Accepted Accounting Principles (GAAP) in the
U.S.
D) To enforce tax laws and collect revenue for the government
, Page 3 of 56
Answer: C
Rationale: The FASB is the independent, private-sector organization designated by the SEC
to set and improve GAAP for private and public sector businesses in the U.S.
3. Which major accounting scandal directly led to the creation of the Sarbanes-
Oxley Act (SOX) of 2002?
A) The savings and loan crisis of the 1980s
B) The fraudulent practices of Enron, WorldCom, and Tyco
C) The 2008 financial crisis caused by subprime mortgages
D) The Ponzi scheme run by Bernie Madoff
Answer: B
Rationale: The massive corporate fraud at Enron, WorldCom, Tyco, and others shook
investor confidence and prompted Congress to pass the Sarbanes-Oxley Act, which
established stricter corporate governance, internal controls, and audit requirements.
4. What is the function of the Public Company Accounting Oversight Board
(PCAOB)?
A) To create accounting principles for non-profit organizations
B) To set ethical standards for Chartered Financial Analysts (CFAs)
C) To oversee the audits of public companies in order to protect the interests of
investors
D) To manage the initial public offerings (IPOs) of new tech companies
Answer: C
Rationale: Created by the Sarbanes-Oxley Act, the PCAOB is a non-profit corporation that
oversees the audits of public companies to ensure they are accurate, independent, and free
from fraud, thus protecting investors.
5. According to the Revenue Recognition Principle, when should a company record
revenue?
A) When a customer places a signed purchase order
B) When cash is received from the customer
C) When the performance obligation is satisfied (e.g., goods are delivered or services are
, Page 4 of 56
performed)
D) At the end of the accounting period, regardless of transaction date
Answer: C
Rationale: The revenue recognition principle is a cornerstone of accrual accounting. It
dictates that revenue is recorded when it is earned, which is when the company has
provided the goods or services to the customer, not when payment is received.
6. The Matching Principle in accounting requires that:
A) Total assets must equal total liabilities plus equity on every transaction
B) Revenue be recorded at the same time as a cash receipt
C) Expenses be recorded in the same period as the revenues they helped to generate
D) All financial statements be prepared using the cash basis of accounting
Answer: C
Rationale: The matching principle guides expense recognition. It ensures that costs are
matched with the associated revenues in the same period to accurately calculate net
income, providing a clearer picture of profitability.
**7. A company using the accrual basis of accounting
pays 12,000fora12−monthinsurancepolicyonSeptember1st.OnDecember31st,ho
wmuchinsuranceexpenseshouldbereportedontheincomestatement?∗∗A)12,000fo
ra12−monthinsurancepolicyonSeptember1st.OnDecember31st,howmuchinsuran
ceexpenseshouldbereportedontheincomestatement?∗∗A)12,000
B) 4,000C)4,000C)1,000
D) 0∗∗Answer:B∗∗∗Rationale:Thepolicycovers4months(Sept,Oct,Nov,Dec)ofthe
12−monthperiod.Theexpenseisrecognizedasitisincurred:(0∗∗Answer:B∗∗∗Ration
ale:Thepolicycovers4months(Sept,Oct,Nov,Dec)ofthe12−monthperiod.Theexpen
seisrecognizedasitisincurred:(12, months) * 4 months
= 4,000.Theremaining4,000.Theremaining8,000 is a prepaid asset on the balance
sheet.*
8. A company provides services worth $5,000 in December but does not receive a
cash payment until January. Under the cash basis of accounting, how will this
WGU D774 OBJECTIVE ASSESSMENT 2
(INTRODUCTION TO BUSINESS ACCOUNTING)
2026 PRACTICE EXAM COMPLETE (150)
CURRENT TESTING QUESTIONS AND
CORRECT ANSWERS WITH DETAILED
EXPLANATIONS|GUARANTEED PASS.
WGU D774
Prepare for the WGU D774 Objective Assessment 2 (Introduction to
Business Accounting) Practice Exam with questions covering
accounting principles, financial statements, bookkeeping, assets and
liabilities, journal entries, and business accounting concepts. This
study guide helps reinforce essential accounting knowledge and
supports effective objective assessment preparation. Designed to
improve analytical skills and boost confidence in introductory business
accounting coursework. Suitable for business, finance, and WGU
students.
MULTIPLE CHOICE.
Part 1: Foundational Accounting Concepts & Principles (Qs 1-25)
1. What is the primary purpose of financial accounting?
A) To forecast future sales and create internal budgets
B) To provide standardized financial information to external users like investors and
creditors
C) To calculate tax liabilities for government agencies
D) To track the daily cash flow for operational management
Answer: B
Rationale: Financial accounting focuses on creating standardized reports (financial
statements) for external stakeholders. Internal budgeting (A) and operational tracking (D)
are roles of managerial accounting. Tax calculation (C) is a specialized function.
, Page 2 of 56
2. Which of the following best describes the role of the Financial Accounting
Standards Board (FASB)?
A) To oversee the audits of public companies and protect investors
B) To regulate the stock exchanges where company shares are traded
C) To establish and improve the Generally Accepted Accounting Principles (GAAP) in the
U.S.
D) To enforce tax laws and collect revenue for the government
, Page 3 of 56
Answer: C
Rationale: The FASB is the independent, private-sector organization designated by the SEC
to set and improve GAAP for private and public sector businesses in the U.S.
3. Which major accounting scandal directly led to the creation of the Sarbanes-
Oxley Act (SOX) of 2002?
A) The savings and loan crisis of the 1980s
B) The fraudulent practices of Enron, WorldCom, and Tyco
C) The 2008 financial crisis caused by subprime mortgages
D) The Ponzi scheme run by Bernie Madoff
Answer: B
Rationale: The massive corporate fraud at Enron, WorldCom, Tyco, and others shook
investor confidence and prompted Congress to pass the Sarbanes-Oxley Act, which
established stricter corporate governance, internal controls, and audit requirements.
4. What is the function of the Public Company Accounting Oversight Board
(PCAOB)?
A) To create accounting principles for non-profit organizations
B) To set ethical standards for Chartered Financial Analysts (CFAs)
C) To oversee the audits of public companies in order to protect the interests of
investors
D) To manage the initial public offerings (IPOs) of new tech companies
Answer: C
Rationale: Created by the Sarbanes-Oxley Act, the PCAOB is a non-profit corporation that
oversees the audits of public companies to ensure they are accurate, independent, and free
from fraud, thus protecting investors.
5. According to the Revenue Recognition Principle, when should a company record
revenue?
A) When a customer places a signed purchase order
B) When cash is received from the customer
C) When the performance obligation is satisfied (e.g., goods are delivered or services are
, Page 4 of 56
performed)
D) At the end of the accounting period, regardless of transaction date
Answer: C
Rationale: The revenue recognition principle is a cornerstone of accrual accounting. It
dictates that revenue is recorded when it is earned, which is when the company has
provided the goods or services to the customer, not when payment is received.
6. The Matching Principle in accounting requires that:
A) Total assets must equal total liabilities plus equity on every transaction
B) Revenue be recorded at the same time as a cash receipt
C) Expenses be recorded in the same period as the revenues they helped to generate
D) All financial statements be prepared using the cash basis of accounting
Answer: C
Rationale: The matching principle guides expense recognition. It ensures that costs are
matched with the associated revenues in the same period to accurately calculate net
income, providing a clearer picture of profitability.
**7. A company using the accrual basis of accounting
pays 12,000fora12−monthinsurancepolicyonSeptember1st.OnDecember31st,ho
wmuchinsuranceexpenseshouldbereportedontheincomestatement?∗∗A)12,000fo
ra12−monthinsurancepolicyonSeptember1st.OnDecember31st,howmuchinsuran
ceexpenseshouldbereportedontheincomestatement?∗∗A)12,000
B) 4,000C)4,000C)1,000
D) 0∗∗Answer:B∗∗∗Rationale:Thepolicycovers4months(Sept,Oct,Nov,Dec)ofthe
12−monthperiod.Theexpenseisrecognizedasitisincurred:(0∗∗Answer:B∗∗∗Ration
ale:Thepolicycovers4months(Sept,Oct,Nov,Dec)ofthe12−monthperiod.Theexpen
seisrecognizedasitisincurred:(12, months) * 4 months
= 4,000.Theremaining4,000.Theremaining8,000 is a prepaid asset on the balance
sheet.*
8. A company provides services worth $5,000 in December but does not receive a
cash payment until January. Under the cash basis of accounting, how will this
