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WSP Accounting Crash Course Exam V4 2026/2027
Actual Exam | Actual Questions and Correct Answers
with Detailed Rationales | Wall Street Prep | Graded
A+ | Pass Guaranteed
Section 1: Accounting Fundamentals
Q1: The accounting equation is:
A. Assets = Liabilities + Owner's Equity [CORRECT]
B. Assets = Liabilities - Owner's Equity
C. Assets + Liabilities = Owner's Equity
D. Assets + Owner's Equity = Liabilities
Correct Answer: A
Rationale: The fundamental accounting equation is Assets = Liabilities + Owner's Equity. This
equation must always balance. Options B, C, and D present mathematically incorrect or
unbalanced variations of the equation.
Q2: Under accrual accounting, revenue is recognized when:
A. Cash is received from the customer
B. It is earned, regardless of when cash is received [CORRECT]
C. The invoice is printed
D. The fiscal year ends
Correct Answer: B
Rationale: Accrual accounting dictates that revenue is recognized when it is earned and
realizable (performance obligation satisfied), not necessarily when cash changes hands. Cash
basis accounting recognizes revenue upon receipt.
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Q3: Which of the following accounts normally has a debit balance?
A. Accounts Payable
B. Retained Earnings
C. Cash [CORRECT]
D. Common Stock
Correct Answer: C
Rationale: Assets (like Cash) have normal debit balances. Liabilities (Accounts Payable) and
Equity accounts (Retained Earnings, Common Stock) have normal credit balances.
Q4: The matching principle requires that:
A. Assets are matched to liabilities
B. Expenses are recognized in the same period as the revenues they help generate [CORRECT]
C. Debits match credits
D. Cash inflows match cash outflows
Correct Answer: B
Rationale: The matching principle is a cornerstone of accrual accounting, requiring expenses to
be recorded in the period in which the related revenues are recognized.
Q5: Double-entry accounting means:
A. Every transaction affects at least two accounts [CORRECT]
B. Every transaction is entered twice
C. Two people must approve a transaction
D. Debits must equal credits in the ledger only
Correct Answer: A
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Rationale: Double-entry accounting means that for every transaction, total debits must equal total
credits, affecting at least two accounts to keep the accounting equation balanced.
Q6: A company purchases equipment for $5,000 cash. How does this affect the accounting
equation?
A. Assets increase; Assets decrease [CORRECT]
B. Assets increase; Liabilities increase
C. Assets decrease; Equity decreases
D. Liabilities increase; Equity decreases
Correct Answer: A
Rationale: Equipment (Asset) increases by $5,000, and Cash (Asset) decreases by $5,000. This
results in no net change in total assets, liabilities, or equity, but the composition of assets
changes.
Q7: Which financial statement reports a company's financial position at a specific point in time?
A. Income Statement
B. Balance Sheet [CORRECT]
C. Statement of Cash Flows
D. Statement of Retained Earnings
Correct Answer: B
Rationale: The Balance Sheet is a snapshot of financial position (Assets, Liabilities, Equity) at a
specific date. The Income Statement and Cash Flow Statement cover a period of time.
Q8: Accrued expenses are:
A. Expenses paid in advance
B. Expenses incurred but not yet paid or recorded [CORRECT]
C. Expenses recorded but not yet incurred
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D. Expenses that have been paid
Correct Answer: B
Rationale: Accrued expenses are liabilities representing expenses that have been incurred during
a period but have not yet been paid or recorded in the financial statements.
Q9: The "Chart of Accounts" is:
A. A list of all account names and numbers used by a company [CORRECT]
B. A graphical representation of net income
C. A table of stock prices
D. A list of all journal entries
Correct Answer: A
Rationale: A Chart of Accounts is a listing of every account name and number used in the general
ledger for recording transactions.
Q10: Which of the following is an example of an intangible asset?
A. Inventory
B. Land
C. Goodwill [CORRECT]
D. Accounts Receivable
Correct Answer: C
Rationale: Goodwill is an intangible asset representing the value of a company's brand, customer
relationships, etc. Inventory, Land, and Accounts Receivable are tangible assets or current assets.
Q11: The "Going Concern" principle assumes:
A. The company will be liquidated soon
WSP Accounting Crash Course Exam V4 2026/2027
Actual Exam | Actual Questions and Correct Answers
with Detailed Rationales | Wall Street Prep | Graded
A+ | Pass Guaranteed
Section 1: Accounting Fundamentals
Q1: The accounting equation is:
A. Assets = Liabilities + Owner's Equity [CORRECT]
B. Assets = Liabilities - Owner's Equity
C. Assets + Liabilities = Owner's Equity
D. Assets + Owner's Equity = Liabilities
Correct Answer: A
Rationale: The fundamental accounting equation is Assets = Liabilities + Owner's Equity. This
equation must always balance. Options B, C, and D present mathematically incorrect or
unbalanced variations of the equation.
Q2: Under accrual accounting, revenue is recognized when:
A. Cash is received from the customer
B. It is earned, regardless of when cash is received [CORRECT]
C. The invoice is printed
D. The fiscal year ends
Correct Answer: B
Rationale: Accrual accounting dictates that revenue is recognized when it is earned and
realizable (performance obligation satisfied), not necessarily when cash changes hands. Cash
basis accounting recognizes revenue upon receipt.
,2
Q3: Which of the following accounts normally has a debit balance?
A. Accounts Payable
B. Retained Earnings
C. Cash [CORRECT]
D. Common Stock
Correct Answer: C
Rationale: Assets (like Cash) have normal debit balances. Liabilities (Accounts Payable) and
Equity accounts (Retained Earnings, Common Stock) have normal credit balances.
Q4: The matching principle requires that:
A. Assets are matched to liabilities
B. Expenses are recognized in the same period as the revenues they help generate [CORRECT]
C. Debits match credits
D. Cash inflows match cash outflows
Correct Answer: B
Rationale: The matching principle is a cornerstone of accrual accounting, requiring expenses to
be recorded in the period in which the related revenues are recognized.
Q5: Double-entry accounting means:
A. Every transaction affects at least two accounts [CORRECT]
B. Every transaction is entered twice
C. Two people must approve a transaction
D. Debits must equal credits in the ledger only
Correct Answer: A
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Rationale: Double-entry accounting means that for every transaction, total debits must equal total
credits, affecting at least two accounts to keep the accounting equation balanced.
Q6: A company purchases equipment for $5,000 cash. How does this affect the accounting
equation?
A. Assets increase; Assets decrease [CORRECT]
B. Assets increase; Liabilities increase
C. Assets decrease; Equity decreases
D. Liabilities increase; Equity decreases
Correct Answer: A
Rationale: Equipment (Asset) increases by $5,000, and Cash (Asset) decreases by $5,000. This
results in no net change in total assets, liabilities, or equity, but the composition of assets
changes.
Q7: Which financial statement reports a company's financial position at a specific point in time?
A. Income Statement
B. Balance Sheet [CORRECT]
C. Statement of Cash Flows
D. Statement of Retained Earnings
Correct Answer: B
Rationale: The Balance Sheet is a snapshot of financial position (Assets, Liabilities, Equity) at a
specific date. The Income Statement and Cash Flow Statement cover a period of time.
Q8: Accrued expenses are:
A. Expenses paid in advance
B. Expenses incurred but not yet paid or recorded [CORRECT]
C. Expenses recorded but not yet incurred
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D. Expenses that have been paid
Correct Answer: B
Rationale: Accrued expenses are liabilities representing expenses that have been incurred during
a period but have not yet been paid or recorded in the financial statements.
Q9: The "Chart of Accounts" is:
A. A list of all account names and numbers used by a company [CORRECT]
B. A graphical representation of net income
C. A table of stock prices
D. A list of all journal entries
Correct Answer: A
Rationale: A Chart of Accounts is a listing of every account name and number used in the general
ledger for recording transactions.
Q10: Which of the following is an example of an intangible asset?
A. Inventory
B. Land
C. Goodwill [CORRECT]
D. Accounts Receivable
Correct Answer: C
Rationale: Goodwill is an intangible asset representing the value of a company's brand, customer
relationships, etc. Inventory, Land, and Accounts Receivable are tangible assets or current assets.
Q11: The "Going Concern" principle assumes:
A. The company will be liquidated soon
