WGU D196,, Questions with Correct Answers (Grade A+)
Question 1: What is the correct sequence of budgets in a manufacturing business?
Answer: Sales, production, direct materials
Question 2: What is the effect of a company's accounting department maintaining high ethical
standards?
Answer: The company's accounting information will increase in value.
Question 3: Why might employees be interested in their company's financial accounting information?
Answer: Financial statement data are often used in determining employee bonuses.
Question 4: Which group establishes financial accounting rules in the United States?
Answer: Financial Accounting Standards Board (FASB)
Question 5: Which report is one of the three primary financial statements?
Answer: Statement of cash flows
Question 6: A company paid $5,000 cash in advertising costs. How does this transaction affect the
paying company's accounting equation?
Answer: Assets increase by $5,000; expenses increase by $5,000.
Question 7: A company borrowed $80,000 cash from a bank.
Answer: Assets increase by $80,000; liabilities increase by $80,000.
Question 8: What is the impact of expenses on the accounting equation?
Answer: Expenses decrease owners' equity.
Question 9: Which type of account are accounts payable and notes payable both examples of?
Answer: Liability
Question 10: What is the purpose of the financial accounting cycle?
Answer: To gather information related to the expenses and income generated by a company
Page 1
, Question 11: According to the accounting equation, the amount of liabilities and equity must always be
equal to another amount. What is that other amount?
Answer: Assets
Question 12: Which item is an expense item?
Answer: Cost of goods sold
Question 13: How is gross profit computed?
Answer: Sales minus cost of goods sold
Question 14: Which type of account is retained earnings?
Answer: Equity
Question 15: For purposes of cash flow classification in the statement of cash flows, which item is an
operating activity?
Answer: Paying Employees
Question 16: How does a classified balance sheet provide useful information to a decision maker?
Answer: It distinguishes between current and long-term assets
Question 17: What information does a balance sheet provide to a decision maker?
Answer: Summary of the financial position of a company at a particular date
Question 18: What is an account payable?
Answer: The amount owed by a company that purchased goods or services from a supplier on credit
Question 19: Why is the net cash for December negative while total sales for December are the highest
out of the months from October through December?
Answer: Total cash available does not reflect December sales because there was a high volume of credit
sales.
Question 20: Managerial Accounting
Answer: focuses on the information needed for planning, implementing plans, and controlling costs. For
Internal decisions
Page 2
Question 1: What is the correct sequence of budgets in a manufacturing business?
Answer: Sales, production, direct materials
Question 2: What is the effect of a company's accounting department maintaining high ethical
standards?
Answer: The company's accounting information will increase in value.
Question 3: Why might employees be interested in their company's financial accounting information?
Answer: Financial statement data are often used in determining employee bonuses.
Question 4: Which group establishes financial accounting rules in the United States?
Answer: Financial Accounting Standards Board (FASB)
Question 5: Which report is one of the three primary financial statements?
Answer: Statement of cash flows
Question 6: A company paid $5,000 cash in advertising costs. How does this transaction affect the
paying company's accounting equation?
Answer: Assets increase by $5,000; expenses increase by $5,000.
Question 7: A company borrowed $80,000 cash from a bank.
Answer: Assets increase by $80,000; liabilities increase by $80,000.
Question 8: What is the impact of expenses on the accounting equation?
Answer: Expenses decrease owners' equity.
Question 9: Which type of account are accounts payable and notes payable both examples of?
Answer: Liability
Question 10: What is the purpose of the financial accounting cycle?
Answer: To gather information related to the expenses and income generated by a company
Page 1
, Question 11: According to the accounting equation, the amount of liabilities and equity must always be
equal to another amount. What is that other amount?
Answer: Assets
Question 12: Which item is an expense item?
Answer: Cost of goods sold
Question 13: How is gross profit computed?
Answer: Sales minus cost of goods sold
Question 14: Which type of account is retained earnings?
Answer: Equity
Question 15: For purposes of cash flow classification in the statement of cash flows, which item is an
operating activity?
Answer: Paying Employees
Question 16: How does a classified balance sheet provide useful information to a decision maker?
Answer: It distinguishes between current and long-term assets
Question 17: What information does a balance sheet provide to a decision maker?
Answer: Summary of the financial position of a company at a particular date
Question 18: What is an account payable?
Answer: The amount owed by a company that purchased goods or services from a supplier on credit
Question 19: Why is the net cash for December negative while total sales for December are the highest
out of the months from October through December?
Answer: Total cash available does not reflect December sales because there was a high volume of credit
sales.
Question 20: Managerial Accounting
Answer: focuses on the information needed for planning, implementing plans, and controlling costs. For
Internal decisions
Page 2
