WGU D774 INTRO TO BUSINESS ACCOUNTING
PRE-ASSESSMENT STUDY GUIDE
UPDATED 2026 EXAM QUESTIONS AND ANSWERS
SECTION 1: THE ACCOUNTING EQUATION AND FOUNDATIONS
Question 1
Which of the following is the correct accounting equation?
A) Assets = Liabilities - Common Stock
B) Assets = Liabilities + Equity
C) Assets + Liabilities = Equity
D) Equity = Assets + Liabilities
ANSWER: B) Assets = Liabilities + Equity
,RATIONALE: This is the foundational equation of double - entry accounting. Everything the company owns (Assets) is
financed either by borrowing from creditors (Liabilities) or by the owners (Equity).
Question 2
A company purchases equipment for $10,000, paying $2,000 in cash and signing a note payable for the remaining $8,000.
What is the effect of this transaction on the accounting equation?
A) Assets increase by $10,000 and liabilities increase by $10,000.
B) Assets increase by $8,000 and liabilities incre ase by $8,000.
C) Assets increase by $10,000, assets decrease by $2,000, and liabilities increase by $8,000. Net change: Assets up
$8,000, Liabilities up $8,000.
D) Assets decrease by $2,000 and liabilities increase by $8,000.
ANSWER: C) Assets increase by $10,000, assets decrease by $2,000, and liabilities increase by $8,000. Net change:
Assets up $8,000, Liabilities up $8,000.
RATIONALE: The equipment (asset) increases by $10,000. Cash (asset) decreases by $2,000. Notes payable (liability)
increases by $ 8,000. The equation remains in balance because total assets increase by $8,000 and total liabilities
increase by $8,000.
Question 3
Which of the following best defines an asset?
A) An obligation to transfer resources to another entity in the future.
, B) A resource owned by the company that is expected to provide future economic benefits.
C) The owners' claim on the assets of the business.
D) A decrease in equity resulting from operating the business.
ANSWER: B) A resource owned by the company that is expected to provide future economic benefits.
RATIONALE: Assets are items of value like cash, inventory, and equipment. Option A defines a liability. Option C defines
equity. Option D defines an expense.
SECTION 2: DEBITS, CREDITS, AND THE GENERAL JOURNAL
Question 4
What is the normal balance of a revenue account?
A) Debit
B) Credit
C) It depends on the specific type of revenue.
D) Neither; revenue accounts do not have a normal balance.
ANSWER: B) Credit
RATIONALE: Revenues increase equity, and equity increases with credits. Therefore, revenues have a normal credit
balance. Expenses and dividends have normal debit balances because they decrease equity.
PRE-ASSESSMENT STUDY GUIDE
UPDATED 2026 EXAM QUESTIONS AND ANSWERS
SECTION 1: THE ACCOUNTING EQUATION AND FOUNDATIONS
Question 1
Which of the following is the correct accounting equation?
A) Assets = Liabilities - Common Stock
B) Assets = Liabilities + Equity
C) Assets + Liabilities = Equity
D) Equity = Assets + Liabilities
ANSWER: B) Assets = Liabilities + Equity
,RATIONALE: This is the foundational equation of double - entry accounting. Everything the company owns (Assets) is
financed either by borrowing from creditors (Liabilities) or by the owners (Equity).
Question 2
A company purchases equipment for $10,000, paying $2,000 in cash and signing a note payable for the remaining $8,000.
What is the effect of this transaction on the accounting equation?
A) Assets increase by $10,000 and liabilities increase by $10,000.
B) Assets increase by $8,000 and liabilities incre ase by $8,000.
C) Assets increase by $10,000, assets decrease by $2,000, and liabilities increase by $8,000. Net change: Assets up
$8,000, Liabilities up $8,000.
D) Assets decrease by $2,000 and liabilities increase by $8,000.
ANSWER: C) Assets increase by $10,000, assets decrease by $2,000, and liabilities increase by $8,000. Net change:
Assets up $8,000, Liabilities up $8,000.
RATIONALE: The equipment (asset) increases by $10,000. Cash (asset) decreases by $2,000. Notes payable (liability)
increases by $ 8,000. The equation remains in balance because total assets increase by $8,000 and total liabilities
increase by $8,000.
Question 3
Which of the following best defines an asset?
A) An obligation to transfer resources to another entity in the future.
, B) A resource owned by the company that is expected to provide future economic benefits.
C) The owners' claim on the assets of the business.
D) A decrease in equity resulting from operating the business.
ANSWER: B) A resource owned by the company that is expected to provide future economic benefits.
RATIONALE: Assets are items of value like cash, inventory, and equipment. Option A defines a liability. Option C defines
equity. Option D defines an expense.
SECTION 2: DEBITS, CREDITS, AND THE GENERAL JOURNAL
Question 4
What is the normal balance of a revenue account?
A) Debit
B) Credit
C) It depends on the specific type of revenue.
D) Neither; revenue accounts do not have a normal balance.
ANSWER: B) Credit
RATIONALE: Revenues increase equity, and equity increases with credits. Therefore, revenues have a normal credit
balance. Expenses and dividends have normal debit balances because they decrease equity.
