WSP ACCOUNTING PRACTICE TEST
QUESTIONS AND ANSWERS 2026 UPDATED
VERSION
◉ Walk me through the 3 financial statements. Answer: Income
Statement - Shows a companys profitability over a specified period.
The beginning line item is revenue and upon deducting various costs
and expenses, the ending line item is net income
Balance Sheet - Snapshot of a companys resources and (assets) and
sources of funding (liabilities and shareholders equity) at a specific
point in time
Cash flow statement - Starting line item is net income, which will be
adjusted for non-cash items such as D&A and changes in working
capital to arrive at cash from operations. Cash from investing and
financing activities are then added to cash from operations to arrive
at the net change in cash, which represents the actual cash
inflows/outflows in a given period
◉ Income Statement - line by line. Answer: Revenue - total value of
all sales of goods and delivery of servies
Less: COGS - represents costs directly tied to producing revenue
,_______________________________________
Gross Profit: Revenues - COGS
Less: SGA
Less: R&D
------------------------------
EBITDA
Less: D&A - non cash expense that estimates the annual reduction in
value of fixed and intangible assets
------------------------------
EBIT: EBITDA - DA
Less: interst expense
Pretax Income
Less: Tax expense
Net income
◉ Walk me through the balance sheet. Answer: Shows a companys
assets, liabilities, and equity sections at a specific point in time.
Assets section
- Organized by liquidity, with current assets being assets that can be
converted into cash within a year, such as accounts receivable,
prepaid expenses, and inventory
, - Longer term assets - PPE, Intangible assets, goodwill, and LT
investments
Liabilites section
- Listed in order of how close they are to coming due.
- Current liabilties = accounts payable, accrued expenses, and short
term debt
- Long term liabilties - include items such as long term debt,
deferred revenue, and deferred income taxes
Shareholders equity section
- Consists of common stock, APIC, treasury stock, and retained
earnings
◉ Walk me through the cash flow statement. Answer: 1. Cash from
Operations: The cash from operations section starts with net income
and adds back non-cash expenses such as depreciation &
amortization and stock-
based compensation, and then makes adjustments for changes in
working capital.
2. Cash from Investing: Next, the cash from investing section
accounts for capital expenditures (typically the largest outflow),
followed by any business acquisitions or divestitures.
QUESTIONS AND ANSWERS 2026 UPDATED
VERSION
◉ Walk me through the 3 financial statements. Answer: Income
Statement - Shows a companys profitability over a specified period.
The beginning line item is revenue and upon deducting various costs
and expenses, the ending line item is net income
Balance Sheet - Snapshot of a companys resources and (assets) and
sources of funding (liabilities and shareholders equity) at a specific
point in time
Cash flow statement - Starting line item is net income, which will be
adjusted for non-cash items such as D&A and changes in working
capital to arrive at cash from operations. Cash from investing and
financing activities are then added to cash from operations to arrive
at the net change in cash, which represents the actual cash
inflows/outflows in a given period
◉ Income Statement - line by line. Answer: Revenue - total value of
all sales of goods and delivery of servies
Less: COGS - represents costs directly tied to producing revenue
,_______________________________________
Gross Profit: Revenues - COGS
Less: SGA
Less: R&D
------------------------------
EBITDA
Less: D&A - non cash expense that estimates the annual reduction in
value of fixed and intangible assets
------------------------------
EBIT: EBITDA - DA
Less: interst expense
Pretax Income
Less: Tax expense
Net income
◉ Walk me through the balance sheet. Answer: Shows a companys
assets, liabilities, and equity sections at a specific point in time.
Assets section
- Organized by liquidity, with current assets being assets that can be
converted into cash within a year, such as accounts receivable,
prepaid expenses, and inventory
, - Longer term assets - PPE, Intangible assets, goodwill, and LT
investments
Liabilites section
- Listed in order of how close they are to coming due.
- Current liabilties = accounts payable, accrued expenses, and short
term debt
- Long term liabilties - include items such as long term debt,
deferred revenue, and deferred income taxes
Shareholders equity section
- Consists of common stock, APIC, treasury stock, and retained
earnings
◉ Walk me through the cash flow statement. Answer: 1. Cash from
Operations: The cash from operations section starts with net income
and adds back non-cash expenses such as depreciation &
amortization and stock-
based compensation, and then makes adjustments for changes in
working capital.
2. Cash from Investing: Next, the cash from investing section
accounts for capital expenditures (typically the largest outflow),
followed by any business acquisitions or divestitures.
