WGU D196 PRACTICE EXAM LATEST 2026 |
PRINCIPLES OF FINANCIAL AND MANAGERIAL
ACCOUNTING EXAM REVIEW QUESTIONS AND
CORRECT VERIFIED ANSWERS/ GRADED A+
1. What is the fundamental accounting equation?
A) Assets = Liabilities + Owners' Equity
B) Assets = Liabilities – Owners' Equity
C) Assets + Liabilities = Owners' Equity
D) Owners' Equity = Assets + Liabilities
Answer: A) Assets = Liabilities + Owners' Equity
Rationale: The fundamental accounting equation (Assets =
Liabilities + Owners' Equity) must always balance and forms the
foundation of double-entry bookkeeping. Assets represent what
the company owns, liabilities represent what the company owes,
and owners' equity represents the owners' claim on the assets.
1
,2. Which of the following best describes the purpose of
accounting?
A) To calculate taxes owed to the government
B) To provide quantitative financial information useful for
economic decision-making
C) To ensure a company makes a profit every year
D) To track employee attendance and payroll
Answer: B) To provide quantitative financial information
useful for economic decision-making
Rationale: Accounting is formally defined as a system for
providing quantitative information, primarily financial in nature,
about economic entities that is intended to be useful in making
economic decisions.
3. Which of the following is NOT one of the three basic functions
of accounting?
2
,A) Bookkeeping
B) Analysis
C) Marketing
D) Evaluation
Answer: C) Marketing
Rationale: The three basic functions of accounting are
bookkeeping (recording transactions), analysis (analyzing
business events to determine if information should be captured),
and evaluation (using financial information to evaluate the health
and performance of a business).
4. What are the three primary financial statements?
A) Balance Sheet, Income Statement, Statement of Cash Flows
B) Balance Sheet, Statement of Retained Earnings, Tax Return
C) Income Statement, Cash Budget, Statement of Cash Flows
D) Balance Sheet, Income Statement, Annual Report
3
, Answer: A) Balance Sheet, Income Statement, Statement of
Cash Flows
Rationale: The three primary financial statements are the
balance sheet (reports resources, obligations, and equity), income
statement (reports net income earned during a period), and
statement of cash flows (reports cash collected and paid out in
operating, investing, and financing activities).
5. Which organization sets accounting standards for publicly
listed companies in the United States?
A) SEC (Securities and Exchange Commission)
B) IRS (Internal Revenue Service)
C) FASB (Financial Accounting Standards Board)
D) AICPA (American Institute of Certified Public Accountants)
Answer: C) FASB (Financial Accounting Standards Board)
Rationale: In the US, accounting standards for publicly listed
companies are set by the Financial Accounting Standards Board
4
PRINCIPLES OF FINANCIAL AND MANAGERIAL
ACCOUNTING EXAM REVIEW QUESTIONS AND
CORRECT VERIFIED ANSWERS/ GRADED A+
1. What is the fundamental accounting equation?
A) Assets = Liabilities + Owners' Equity
B) Assets = Liabilities – Owners' Equity
C) Assets + Liabilities = Owners' Equity
D) Owners' Equity = Assets + Liabilities
Answer: A) Assets = Liabilities + Owners' Equity
Rationale: The fundamental accounting equation (Assets =
Liabilities + Owners' Equity) must always balance and forms the
foundation of double-entry bookkeeping. Assets represent what
the company owns, liabilities represent what the company owes,
and owners' equity represents the owners' claim on the assets.
1
,2. Which of the following best describes the purpose of
accounting?
A) To calculate taxes owed to the government
B) To provide quantitative financial information useful for
economic decision-making
C) To ensure a company makes a profit every year
D) To track employee attendance and payroll
Answer: B) To provide quantitative financial information
useful for economic decision-making
Rationale: Accounting is formally defined as a system for
providing quantitative information, primarily financial in nature,
about economic entities that is intended to be useful in making
economic decisions.
3. Which of the following is NOT one of the three basic functions
of accounting?
2
,A) Bookkeeping
B) Analysis
C) Marketing
D) Evaluation
Answer: C) Marketing
Rationale: The three basic functions of accounting are
bookkeeping (recording transactions), analysis (analyzing
business events to determine if information should be captured),
and evaluation (using financial information to evaluate the health
and performance of a business).
4. What are the three primary financial statements?
A) Balance Sheet, Income Statement, Statement of Cash Flows
B) Balance Sheet, Statement of Retained Earnings, Tax Return
C) Income Statement, Cash Budget, Statement of Cash Flows
D) Balance Sheet, Income Statement, Annual Report
3
, Answer: A) Balance Sheet, Income Statement, Statement of
Cash Flows
Rationale: The three primary financial statements are the
balance sheet (reports resources, obligations, and equity), income
statement (reports net income earned during a period), and
statement of cash flows (reports cash collected and paid out in
operating, investing, and financing activities).
5. Which organization sets accounting standards for publicly
listed companies in the United States?
A) SEC (Securities and Exchange Commission)
B) IRS (Internal Revenue Service)
C) FASB (Financial Accounting Standards Board)
D) AICPA (American Institute of Certified Public Accountants)
Answer: C) FASB (Financial Accounting Standards Board)
Rationale: In the US, accounting standards for publicly listed
companies are set by the Financial Accounting Standards Board
4
