WGU D196
Practice Test Questions and Answers
1. What is a transaction ANSWER : Two parties exchanging something of
value
2. What is the effect of a company's accounting department
maintaining highethical standards ANSWER : The company's accounting
information will increase in value.
3. Why might employees be interested in their company's financial
account-ing information ANSWER : Financial statement data are often used
in determining employ-ee bonuses.
4. Which group establishes financial accounting rules in the United
States?-
: financial Accounting Standards Board (FASB)
5. Which report is one of the three primary financial statements
ANSWER : Assetsdecrease by $5,000; expenses increase by $5,000
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, 6. A company borrowed $80,000 cash from a bank.
How does this transaction affect the accounting equation of the
borrowingcompany ANSWER : Assets increase by $80,000; liabilities
increase by $80,000.
7. A company paid $5,000 cash in advertising costs.
How does this transaction affect the paying company's accounting
equa-tion ANSWER : Assets decrease by $5,000; expenses increase by
$5,000.
8. What is the impact of expenses on the accounting equation
ANSWER : Expensesdecrease owners' equity.
9. Which type of account are accounts payable and notes payable
bothexamples of ANSWER : Liability
10. What is the purpose of the financial accounting cycle ANSWER : To
turn informationabout transactions into financial statements
11. According to the accounting equation, the amount of liabilities and
equitymust always be equal to another amount.
What is that other amount ANSWER : Assets
2/4
Practice Test Questions and Answers
1. What is a transaction ANSWER : Two parties exchanging something of
value
2. What is the effect of a company's accounting department
maintaining highethical standards ANSWER : The company's accounting
information will increase in value.
3. Why might employees be interested in their company's financial
account-ing information ANSWER : Financial statement data are often used
in determining employ-ee bonuses.
4. Which group establishes financial accounting rules in the United
States?-
: financial Accounting Standards Board (FASB)
5. Which report is one of the three primary financial statements
ANSWER : Assetsdecrease by $5,000; expenses increase by $5,000
1/4
, 6. A company borrowed $80,000 cash from a bank.
How does this transaction affect the accounting equation of the
borrowingcompany ANSWER : Assets increase by $80,000; liabilities
increase by $80,000.
7. A company paid $5,000 cash in advertising costs.
How does this transaction affect the paying company's accounting
equa-tion ANSWER : Assets decrease by $5,000; expenses increase by
$5,000.
8. What is the impact of expenses on the accounting equation
ANSWER : Expensesdecrease owners' equity.
9. Which type of account are accounts payable and notes payable
bothexamples of ANSWER : Liability
10. What is the purpose of the financial accounting cycle ANSWER : To
turn informationabout transactions into financial statements
11. According to the accounting equation, the amount of liabilities and
equitymust always be equal to another amount.
What is that other amount ANSWER : Assets
2/4
