WGU D102 FINANCIAL ACCOUNTING VERIFIED EXAM SOLUTIONS -
COMPREHENSIVE QUESTIONS AND ANSWERS - CURRENT VERSION
2026/2027
1. What is the basic accounting equation? ANSWER Assets = Liabilities
+ Owner's Equity
2. What are the three main categories found on a balance sheet?
ANSWER Assets, Liabilities, and Equity
3. Which financial statement shows a company's financial position at
a specific point in time? ANSWER The Balance Sheet (or Statement of
Financial Position)
4. What does an income statement primarily measure? ANSWER
Revenues and expenses over a period of time to determine net income or
net loss
5. What are the three main activities reported on a statement of cash
flows? ANSWER Operating, Investing, and Financing activities
6. How do the basic financial statements relate to each other?
ANSWER Net income from the income statement flows to retained
earnings on the balance sheet and the statement of cash flows; the
balance sheet shows ending balances that become beginning balances for
the next period
7. What is the purpose of the accounting equation? ANSWER It
provides the foundation for double-entry bookkeeping and ensures the
balance sheet remains balanced
8. What type of account is Accounts Receivable? ANSWER An asset
account
9. What type of account is Accounts Payable? ANSWER A liability
account
10. What type of account is Common Stock? ANSWER An equity
account
,11. Which financial statement is also called the "statement of profit
and loss"? ANSWER The Income Statement
12. Where would you find accumulated depreciation reported?
ANSWER On the balance sheet as a contra-asset account
13. What does the heading of a balance sheet typically include?
ANSWER Company name, title "Balance Sheet," and the specific date (e.g.,
"As of December 31, 20XX")
14. What does the heading of an income statement typically include?
ANSWER Company name, title "Income Statement," and the period
covered (e.g., "For the Year Ended December 31, 20XX")
15. What is the formula for calculating net income? ANSWER
Revenues - Expenses = Net Income
16. If total assets are $150,000 and total liabilities are $90,000, what
is total equity? ANSWER $60,000
17. Which financial statement would show depreciation expense?
ANSWER The Income Statement
18. Where are dividends reported? ANSWER On the Statement of
Retained Earnings (or Statement of Changes in Equity), not on the income
statement
19. What is the order of assets listed on a balance sheet? ANSWER In
order of liquidity (most liquid first)
20. What are current assets? ANSWER Assets expected to be converted
to cash or used up within one year or the operating cycle, whichever is
longer
21. What are current liabilities? ANSWER Obligations due within one
year or the operating cycle, whichever is longer
22. What is retained earnings? ANSWER Cumulative net income minus
cumulative dividends declared over the life of the company
23. Which financial statement uses the phrase "For the period
ended"? ANSWER The Income Statement, Statement of Retained
Earnings, and Statement of Cash Flows
24. What is gross profit? ANSWER Net Sales - Cost of Goods Sold
, 25. What is the difference between gross profit and net income?
ANSWER Gross profit is sales minus COGS; net income is gross profit
minus all other expenses plus other revenues
26. Where would you find the cash balance at the end of the period?
ANSWER On the balance sheet and the statement of cash flows
27. What is a contra-asset account? ANSWER An account with a credit
balance that reduces the value of a related asset account (e.g.,
Accumulated Depreciation)
28. What is the purpose of the statement of cash flows? ANSWER To
show how cash was generated and used during a specific period
29. What type of activity is the purchase of equipment classified as
on the statement of cash flows? ANSWER Investing activity
30. What type of activity is issuing common stock classified as on the
statement of cash flows? ANSWER Financing activity
31. What type of activity is collecting cash from customers classified
as on the statement of cash flows? ANSWER Operating activity
32. What is the relationship between the balance sheet and the
accounting equation? ANSWER The balance sheet is a detailed
presentation of the accounting equation at a specific date
33. If a company has revenues of $500,000, expenses of $350,000,
and dividends of $20,000, what is the net income? ANSWER $150,000
34. What is the "bottom line" of an income statement? ANSWER Net
income or net loss
35. What does a classified balance sheet do? ANSWER It separates
current and non-current assets and liabilities
36. What is working capital? ANSWER Current Assets - Current
Liabilities
37. What is the current ratio formula? ANSWER Current Assets ÷
Current Liabilities
38. Where would unearned revenue be classified on the balance
sheet? ANSWER As a current liability
COMPREHENSIVE QUESTIONS AND ANSWERS - CURRENT VERSION
2026/2027
1. What is the basic accounting equation? ANSWER Assets = Liabilities
+ Owner's Equity
2. What are the three main categories found on a balance sheet?
ANSWER Assets, Liabilities, and Equity
3. Which financial statement shows a company's financial position at
a specific point in time? ANSWER The Balance Sheet (or Statement of
Financial Position)
4. What does an income statement primarily measure? ANSWER
Revenues and expenses over a period of time to determine net income or
net loss
5. What are the three main activities reported on a statement of cash
flows? ANSWER Operating, Investing, and Financing activities
6. How do the basic financial statements relate to each other?
ANSWER Net income from the income statement flows to retained
earnings on the balance sheet and the statement of cash flows; the
balance sheet shows ending balances that become beginning balances for
the next period
7. What is the purpose of the accounting equation? ANSWER It
provides the foundation for double-entry bookkeeping and ensures the
balance sheet remains balanced
8. What type of account is Accounts Receivable? ANSWER An asset
account
9. What type of account is Accounts Payable? ANSWER A liability
account
10. What type of account is Common Stock? ANSWER An equity
account
,11. Which financial statement is also called the "statement of profit
and loss"? ANSWER The Income Statement
12. Where would you find accumulated depreciation reported?
ANSWER On the balance sheet as a contra-asset account
13. What does the heading of a balance sheet typically include?
ANSWER Company name, title "Balance Sheet," and the specific date (e.g.,
"As of December 31, 20XX")
14. What does the heading of an income statement typically include?
ANSWER Company name, title "Income Statement," and the period
covered (e.g., "For the Year Ended December 31, 20XX")
15. What is the formula for calculating net income? ANSWER
Revenues - Expenses = Net Income
16. If total assets are $150,000 and total liabilities are $90,000, what
is total equity? ANSWER $60,000
17. Which financial statement would show depreciation expense?
ANSWER The Income Statement
18. Where are dividends reported? ANSWER On the Statement of
Retained Earnings (or Statement of Changes in Equity), not on the income
statement
19. What is the order of assets listed on a balance sheet? ANSWER In
order of liquidity (most liquid first)
20. What are current assets? ANSWER Assets expected to be converted
to cash or used up within one year or the operating cycle, whichever is
longer
21. What are current liabilities? ANSWER Obligations due within one
year or the operating cycle, whichever is longer
22. What is retained earnings? ANSWER Cumulative net income minus
cumulative dividends declared over the life of the company
23. Which financial statement uses the phrase "For the period
ended"? ANSWER The Income Statement, Statement of Retained
Earnings, and Statement of Cash Flows
24. What is gross profit? ANSWER Net Sales - Cost of Goods Sold
, 25. What is the difference between gross profit and net income?
ANSWER Gross profit is sales minus COGS; net income is gross profit
minus all other expenses plus other revenues
26. Where would you find the cash balance at the end of the period?
ANSWER On the balance sheet and the statement of cash flows
27. What is a contra-asset account? ANSWER An account with a credit
balance that reduces the value of a related asset account (e.g.,
Accumulated Depreciation)
28. What is the purpose of the statement of cash flows? ANSWER To
show how cash was generated and used during a specific period
29. What type of activity is the purchase of equipment classified as
on the statement of cash flows? ANSWER Investing activity
30. What type of activity is issuing common stock classified as on the
statement of cash flows? ANSWER Financing activity
31. What type of activity is collecting cash from customers classified
as on the statement of cash flows? ANSWER Operating activity
32. What is the relationship between the balance sheet and the
accounting equation? ANSWER The balance sheet is a detailed
presentation of the accounting equation at a specific date
33. If a company has revenues of $500,000, expenses of $350,000,
and dividends of $20,000, what is the net income? ANSWER $150,000
34. What is the "bottom line" of an income statement? ANSWER Net
income or net loss
35. What does a classified balance sheet do? ANSWER It separates
current and non-current assets and liabilities
36. What is working capital? ANSWER Current Assets - Current
Liabilities
37. What is the current ratio formula? ANSWER Current Assets ÷
Current Liabilities
38. Where would unearned revenue be classified on the balance
sheet? ANSWER As a current liability
