D074 Principles of Accounting WGU Exam
UPDATED QUESTIONS AND CORRECT
ANSWERS
What is the effect of a company's accounting department maintaining high ethical standards? -
CORRECT ANSWER The company's accounting information will increase in value.
Why might employees be interested in their company's financial accounting information? -
CORRECT ANSWER Financial statement data are often used in determining employee
bonuses.
What group establishes financial accounting rules in the United States? - CORRECT
ANSWER Financial Accounting Standards Board (FASB).
Which report is one of the three primary financial statements? Statement of cash flows, statement of
management accounting, statement of the accounting cycle, or statement of stakeholder funds. -
CORRECT ANSWER Statement of cash flows.
A company paid $5,000 cash in advertising costs. How does this transaction affect the paying
company's accounting equation? - CORRECT ANSWER Assets decrease by $5,000; expenses
increase by $5,000.
What is a transaction? - CORRECT ANSWER Two parties exchange something of value.
A company borrowed $80,000 cash from a bank. How does this transaction affect the accounting
equation of the borrowing company? - CORRECT ANSWER Assets increase by $80,000;
liabilities increase by $80,000.
What is the impact of expenses on the accounting equation? - CORRECT ANSWER Expenses
decrease owners' equity.
Which type of account are accounts payable and notes payable both examples of? - CORRECT
ANSWER Liability.
, What is the purpose of the financial accounting cycle? - CORRECT ANSWER To turn
information about transactions into financial statements.
According to the accounting equation, the amount of liabilities and equity must always be equal to
another amount. what is that other amount? - CORRECT ANSWER Assets.
Which item is an expense item? Loans payable, accounts receivable, accounts payable, costs of goods
sold. - CORRECT ANSWER Costs of goods sold.
How is gross profit computed? - CORRECT ANSWER Sales minus cost of goods sold.
Which type of account is retained earnings? - CORRECT ANSWER Equity.
For purposes of cash flow classification in the statement of cash flows, which item is an operating
activity? Buying equipment, paying employees, selling bonds, distributing dividends. - CORRECT
ANSWER Paying employees.
How does a classified balance sheet provide useful information to a decision maker? - CORRECT
ANSWER It distinguishes between current and long-term assets.
What information does a balance sheet provide to a decision maker? - CORRECT
ANSWER Summary of the financial position of a company at a particular date.
What is an account payable? - CORRECT ANSWER The amount owed by a company that
purchased goods or services from a supplier on credit.
What is an example of a financial cost that would result from poor direct labor budgeting and
planning? - CORRECT ANSWER Increased hiring, training, and overtime costs.
What does a manager have control over in a cost center? - CORRECT ANSWER Costs.
UPDATED QUESTIONS AND CORRECT
ANSWERS
What is the effect of a company's accounting department maintaining high ethical standards? -
CORRECT ANSWER The company's accounting information will increase in value.
Why might employees be interested in their company's financial accounting information? -
CORRECT ANSWER Financial statement data are often used in determining employee
bonuses.
What group establishes financial accounting rules in the United States? - CORRECT
ANSWER Financial Accounting Standards Board (FASB).
Which report is one of the three primary financial statements? Statement of cash flows, statement of
management accounting, statement of the accounting cycle, or statement of stakeholder funds. -
CORRECT ANSWER Statement of cash flows.
A company paid $5,000 cash in advertising costs. How does this transaction affect the paying
company's accounting equation? - CORRECT ANSWER Assets decrease by $5,000; expenses
increase by $5,000.
What is a transaction? - CORRECT ANSWER Two parties exchange something of value.
A company borrowed $80,000 cash from a bank. How does this transaction affect the accounting
equation of the borrowing company? - CORRECT ANSWER Assets increase by $80,000;
liabilities increase by $80,000.
What is the impact of expenses on the accounting equation? - CORRECT ANSWER Expenses
decrease owners' equity.
Which type of account are accounts payable and notes payable both examples of? - CORRECT
ANSWER Liability.
, What is the purpose of the financial accounting cycle? - CORRECT ANSWER To turn
information about transactions into financial statements.
According to the accounting equation, the amount of liabilities and equity must always be equal to
another amount. what is that other amount? - CORRECT ANSWER Assets.
Which item is an expense item? Loans payable, accounts receivable, accounts payable, costs of goods
sold. - CORRECT ANSWER Costs of goods sold.
How is gross profit computed? - CORRECT ANSWER Sales minus cost of goods sold.
Which type of account is retained earnings? - CORRECT ANSWER Equity.
For purposes of cash flow classification in the statement of cash flows, which item is an operating
activity? Buying equipment, paying employees, selling bonds, distributing dividends. - CORRECT
ANSWER Paying employees.
How does a classified balance sheet provide useful information to a decision maker? - CORRECT
ANSWER It distinguishes between current and long-term assets.
What information does a balance sheet provide to a decision maker? - CORRECT
ANSWER Summary of the financial position of a company at a particular date.
What is an account payable? - CORRECT ANSWER The amount owed by a company that
purchased goods or services from a supplier on credit.
What is an example of a financial cost that would result from poor direct labor budgeting and
planning? - CORRECT ANSWER Increased hiring, training, and overtime costs.
What does a manager have control over in a cost center? - CORRECT ANSWER Costs.
