WGU C213 OBJECTIVE ASSESSMENT ACCOUNTING FOR
DECISION MAKERS 2026/2027 | Actual Questions and
Verified Answers | A Grade | Pass Guaranteed
Financial Accounting Foundations & the Accounting Cycle (14
Questions)
Q1: Which fundamental accounting equation must always remain in balance after every
transaction?
A. Revenue - Expenses = Net Income
B. Assets = Liabilities + Equity [CORRECT]
C. Debits = Credits + Equity
D. Cash = Assets - Liabilities
Correct Answer: B
Rationale: The accounting equation (Assets = Liabilities + Equity) is the foundation of
double-entry accounting. Every transaction affects at least two accounts to maintain
this balance. Revenue - Expenses (Option A) is the income statement equation, not the
fundamental accounting equation. Debits must equal credits (Option C is misstated),
and Cash (Option D) is just one asset account.
Q2: A company purchases $5,000 of equipment on credit. Which accounts are affected
and how?
A. Debit Cash $5,000, Credit Equipment $5,000
B. Debit Equipment $5,000, Credit Accounts Payable $5,000 [CORRECT]
C. Debit Accounts Payable $5,000, Credit Equipment $5,000
D. Debit Equipment $5,000, Credit Cash $5,000
Correct Answer: B
Rationale: Purchasing equipment on credit increases the asset Equipment (debit) and
increases the liability Accounts Payable (credit). Equipment is an asset with a normal
debit balance, and Accounts Payable is a liability with a normal credit balance. Option A
,reverses the entry. Option C reverses the debit/credit. Option D would be correct only if
purchased with cash, not on credit.
Q3: Under accrual basis accounting, when is revenue recognized?
A. When cash is received from customers
B. When the performance obligation is satisfied (goods/services delivered) [CORRECT]
C. When the invoice is mailed to the customer
D. When the contract is signed
Correct Answer: B
Rationale: Under GAAP revenue recognition principle, revenue is recognized when (or
as) the entity satisfies performance obligations by transferring promised goods or
services to customers. This is the accrual basis—revenue when earned, expenses when
incurred. Cash basis (Option A) recognizes revenue when cash is received. Mailing
invoices (Option C) and signing contracts (Option D) do not satisfy performance
obligations.
Q4: Which GAAP principle requires that expenses be matched with the revenues they
help generate in the same accounting period?
A. Historical cost principle
B. Revenue recognition principle
C. Matching principle [CORRECT]
D. Full disclosure principle
Correct Answer: C
Rationale: The matching principle (expense recognition principle) requires that
expenses be recorded in the same period as the revenues they help generate. This
ensures accurate net income calculation. Historical cost (Option A) requires assets be
recorded at purchase price. Revenue recognition (Option B) governs when revenue is
recorded. Full disclosure (Option D) requires reporting of all relevant information.
Q5: A company pays $12,000 for a 12-month insurance policy on June 1. What adjusting
entry is required on December 31?
A. Debit Insurance Expense $12,000, Credit Cash $12,000
B. Debit Prepaid Insurance $7,000, Credit Insurance Expense $7,000
C. Debit Insurance Expense $7,000, Credit Prepaid Insurance $7,000 [CORRECT]
,D. Debit Insurance Expense $5,000, Credit Prepaid Insurance $5,000
Correct Answer: C
Rationale: From June 1 to December 31 is 7 months of expired insurance. The adjusting
entry must recognize $7,000 of insurance expense ($12,000 × 7/12) and reduce the
prepaid asset. This matches expense to the period benefited. Option A records the
initial payment, not the adjustment. Option B reverses the debit/credit. Option D
calculates 5 months remaining, not expired.
Q6: Which assumption assumes that the business will continue operating indefinitely
and not be liquidated in the near future?
A. Economic entity assumption
B. Monetary unit assumption
C. Time period assumption
D. Going concern assumption [CORRECT]
Correct Answer: D
Rationale: The going concern assumption presumes the business will continue
operating long enough to use existing assets and fulfill obligations. This justifies
historical cost valuation and depreciation. Economic entity (Option A) separates
business from owners. Monetary unit (Option B) assumes stable currency. Time period
(Option C) allows division into reporting periods.
Q7: A company has beginning retained earnings of $45,000, earns net income of
$28,000, and pays dividends of $10,000. What is ending retained earnings?
A. $63,000
B. $73,000
C. $83,000 [CORRECT]
D. $93,000
Correct Answer: C
Rationale: Ending Retained Earnings = Beginning RE + Net Income - Dividends = $45,000
+ $28,000 - $10,000 = $63,000. Wait, let me recalculate: $45,000 + $28,000 = $73,000;
$73,000 - $10,000 = $63,000. The correct answer should be $63,000 (Option A).
However, looking at the options provided, $83,000 (Option C) is marked correct in my
initial calculation which was wrong. The correct calculation is $45,000 + $28,000 -
, $10,000 = $63,000. Let me correct: The correct answer is A. $63,000. But I marked C as
correct. This is an error in my rationale. The correct answer is A. $63,000.
Let me redo Q7 correctly:
Q7: A company has beginning retained earnings of $45,000, earns net income of
$28,000, and pays dividends of $10,000. What is ending retained earnings?
A. $63,000 [CORRECT]
B. $73,000
C. $83,000
D. $93,000
Correct Answer: A
Rationale: Ending Retained Earnings = Beginning RE + Net Income - Dividends = $45,000
+ $28,000 - $10,000 = $63,000. Option B adds net income but forgets dividends. Option
C adds both net income and dividends (incorrect). Option D is not calculable from given
data.
Q8: Which group of users primarily relies on managerial accounting information for
planning, controlling, and decision-making?
A. External investors and creditors
B. Government regulatory agencies
C. Internal managers and employees [CORRECT]
D. Competitors and suppliers
Correct Answer: C
Rationale: Managerial accounting serves internal users (managers, executives,
employees) for planning, controlling operations, and decision-making. It is not required
to follow GAAP. External investors and creditors (Option A) use financial accounting.
Government agencies (Option B) use financial accounting for regulation and taxation.
Competitors (Option D) are external users without access to internal managerial
reports.
Q9: Which adjusting entry records depreciation expense for the period?
A. Debit Accumulated Depreciation, Credit Depreciation Expense
B. Debit Depreciation Expense, Credit Accumulated Depreciation [CORRECT]
DECISION MAKERS 2026/2027 | Actual Questions and
Verified Answers | A Grade | Pass Guaranteed
Financial Accounting Foundations & the Accounting Cycle (14
Questions)
Q1: Which fundamental accounting equation must always remain in balance after every
transaction?
A. Revenue - Expenses = Net Income
B. Assets = Liabilities + Equity [CORRECT]
C. Debits = Credits + Equity
D. Cash = Assets - Liabilities
Correct Answer: B
Rationale: The accounting equation (Assets = Liabilities + Equity) is the foundation of
double-entry accounting. Every transaction affects at least two accounts to maintain
this balance. Revenue - Expenses (Option A) is the income statement equation, not the
fundamental accounting equation. Debits must equal credits (Option C is misstated),
and Cash (Option D) is just one asset account.
Q2: A company purchases $5,000 of equipment on credit. Which accounts are affected
and how?
A. Debit Cash $5,000, Credit Equipment $5,000
B. Debit Equipment $5,000, Credit Accounts Payable $5,000 [CORRECT]
C. Debit Accounts Payable $5,000, Credit Equipment $5,000
D. Debit Equipment $5,000, Credit Cash $5,000
Correct Answer: B
Rationale: Purchasing equipment on credit increases the asset Equipment (debit) and
increases the liability Accounts Payable (credit). Equipment is an asset with a normal
debit balance, and Accounts Payable is a liability with a normal credit balance. Option A
,reverses the entry. Option C reverses the debit/credit. Option D would be correct only if
purchased with cash, not on credit.
Q3: Under accrual basis accounting, when is revenue recognized?
A. When cash is received from customers
B. When the performance obligation is satisfied (goods/services delivered) [CORRECT]
C. When the invoice is mailed to the customer
D. When the contract is signed
Correct Answer: B
Rationale: Under GAAP revenue recognition principle, revenue is recognized when (or
as) the entity satisfies performance obligations by transferring promised goods or
services to customers. This is the accrual basis—revenue when earned, expenses when
incurred. Cash basis (Option A) recognizes revenue when cash is received. Mailing
invoices (Option C) and signing contracts (Option D) do not satisfy performance
obligations.
Q4: Which GAAP principle requires that expenses be matched with the revenues they
help generate in the same accounting period?
A. Historical cost principle
B. Revenue recognition principle
C. Matching principle [CORRECT]
D. Full disclosure principle
Correct Answer: C
Rationale: The matching principle (expense recognition principle) requires that
expenses be recorded in the same period as the revenues they help generate. This
ensures accurate net income calculation. Historical cost (Option A) requires assets be
recorded at purchase price. Revenue recognition (Option B) governs when revenue is
recorded. Full disclosure (Option D) requires reporting of all relevant information.
Q5: A company pays $12,000 for a 12-month insurance policy on June 1. What adjusting
entry is required on December 31?
A. Debit Insurance Expense $12,000, Credit Cash $12,000
B. Debit Prepaid Insurance $7,000, Credit Insurance Expense $7,000
C. Debit Insurance Expense $7,000, Credit Prepaid Insurance $7,000 [CORRECT]
,D. Debit Insurance Expense $5,000, Credit Prepaid Insurance $5,000
Correct Answer: C
Rationale: From June 1 to December 31 is 7 months of expired insurance. The adjusting
entry must recognize $7,000 of insurance expense ($12,000 × 7/12) and reduce the
prepaid asset. This matches expense to the period benefited. Option A records the
initial payment, not the adjustment. Option B reverses the debit/credit. Option D
calculates 5 months remaining, not expired.
Q6: Which assumption assumes that the business will continue operating indefinitely
and not be liquidated in the near future?
A. Economic entity assumption
B. Monetary unit assumption
C. Time period assumption
D. Going concern assumption [CORRECT]
Correct Answer: D
Rationale: The going concern assumption presumes the business will continue
operating long enough to use existing assets and fulfill obligations. This justifies
historical cost valuation and depreciation. Economic entity (Option A) separates
business from owners. Monetary unit (Option B) assumes stable currency. Time period
(Option C) allows division into reporting periods.
Q7: A company has beginning retained earnings of $45,000, earns net income of
$28,000, and pays dividends of $10,000. What is ending retained earnings?
A. $63,000
B. $73,000
C. $83,000 [CORRECT]
D. $93,000
Correct Answer: C
Rationale: Ending Retained Earnings = Beginning RE + Net Income - Dividends = $45,000
+ $28,000 - $10,000 = $63,000. Wait, let me recalculate: $45,000 + $28,000 = $73,000;
$73,000 - $10,000 = $63,000. The correct answer should be $63,000 (Option A).
However, looking at the options provided, $83,000 (Option C) is marked correct in my
initial calculation which was wrong. The correct calculation is $45,000 + $28,000 -
, $10,000 = $63,000. Let me correct: The correct answer is A. $63,000. But I marked C as
correct. This is an error in my rationale. The correct answer is A. $63,000.
Let me redo Q7 correctly:
Q7: A company has beginning retained earnings of $45,000, earns net income of
$28,000, and pays dividends of $10,000. What is ending retained earnings?
A. $63,000 [CORRECT]
B. $73,000
C. $83,000
D. $93,000
Correct Answer: A
Rationale: Ending Retained Earnings = Beginning RE + Net Income - Dividends = $45,000
+ $28,000 - $10,000 = $63,000. Option B adds net income but forgets dividends. Option
C adds both net income and dividends (incorrect). Option D is not calculable from given
data.
Q8: Which group of users primarily relies on managerial accounting information for
planning, controlling, and decision-making?
A. External investors and creditors
B. Government regulatory agencies
C. Internal managers and employees [CORRECT]
D. Competitors and suppliers
Correct Answer: C
Rationale: Managerial accounting serves internal users (managers, executives,
employees) for planning, controlling operations, and decision-making. It is not required
to follow GAAP. External investors and creditors (Option A) use financial accounting.
Government agencies (Option B) use financial accounting for regulation and taxation.
Competitors (Option D) are external users without access to internal managerial
reports.
Q9: Which adjusting entry records depreciation expense for the period?
A. Debit Accumulated Depreciation, Credit Depreciation Expense
B. Debit Depreciation Expense, Credit Accumulated Depreciation [CORRECT]
