WGU C213 Accounting For Decision Makers
Final Actual Exam Questions with Correct
Answers & Explanations 2026 | Graded A+
Study Guide
Section 1: Accounting Foundations & Financial Statements (Questions 1 –50)
1. Which financial statement reports a company's financial position at a specific point in
time?
A. Income statement
B. Balance sheet
C. Statement of cash flows
D. Statement of retained earnings
Answer: B
Rationale: The balance sheet shows assets, liabilities, and equity at a specific date.
2. The accounting equation is:
A. Assets = Liabilities + Equity
B. Assets + Liabilities = Equity
C. Revenues – Expenses = Net Income
D. Assets = Revenues – Expenses
Answer: A
Rationale: Assets = Liabilities + Equity is the fundamental accounting equation.
3. Which of the following is an asset?
A. Accounts payable
B. Notes payable
C. Inventory
D. Common stock
Answer: C
Rationale: Inventory is a current asset; accounts payable and notes payable are
liabilities; common stock is equity.
4. Which of the following is a liability?
A. Cash
B. Equipment
C. Accounts receivable
D. Wages payable
,Answer: D
Rationale: Wages payable is an obligation to pay employees, a liability.
5. Retained earnings is classified as:
A. Asset
B. Liability
C. Equity
D. Revenue
Answer: C
Rationale: Retained earnings is part of shareholders' equity.
6. The income statement measures performance over a period of time.
A. True
B. False
Answer: A
Rationale: The income statement covers a period (month, quarter, year).
7. Net income is calculated as:
A. Revenues – Expenses
B. Assets – Liabilities
C. Cash inflows – Cash outflows
D. Sales – Cost of goods sold only
Answer: A
Rationale: Net income = total revenues – total expenses.
8. A company has revenues of 100,000andexpensesof100,000andexpensesof70,000.
Net income is:
A. 30,000∗∗B.∗∗30,000∗∗B.∗∗70,000
C. 100,000∗∗D.∗∗100,000∗∗D.∗∗170,000
Answer: A
Rationale: 100,000 – 70,000 = 30,000.
9. Which financial statement shows cash inflows and outflows from operating, investing,
and financing activities?
A. Balance sheet
B. Income statement
C. Statement of cash flows
D. Statement of changes in equity
Answer: C
Rationale: The statement of cash flows categorizes cash activities into operations,
investing, and financing.
,10. The cost principle requires assets to be recorded at:
A. Market value
B. Historical cost
C. Replacement cost
D. Net realizable value
Answer: B
Rationale: Historical cost is the original purchase price.
11. The going concern assumption means that:
A. The company will liquidate soon
B. The company will continue operating indefinitely
C. Assets are reported at market value
D. Liabilities are ignored
Answer: B
Rationale: Going concern assumes the business will continue to operate.
12. The matching principle requires that:
A. Expenses are recorded when cash is paid
B. Expenses are matched with the revenues they help generate
C. Revenues are recorded when cash is received
D. Assets equal liabilities
Answer: B
Rationale: Matching principle aligns expenses with related revenues.
13. Accrual accounting records revenues when:
A. Cash is received
B. Earned, regardless of cash receipt
C. Cash is paid
D. The order is placed
Answer: B
Rationale: Accrual accounting recognizes revenue when earned, not necessarily when
cash is received.
14. A company performs services in December but receives payment in January. Under
accrual accounting, when should revenue be recorded?
A. December
B. January
C. Split between December and January
D. At the end of the fiscal year
, Answer: A
Rationale: Revenue is recorded when earned (December), not when cash is received.
15. A company
pays 12,000foraone−yearinsurancepolicyonJanuary1.Themonthlyinsuranceexpenseis:∗∗
A.∗∗12,000foraone−yearinsurancepolicyonJanuary1.Themonthlyinsuranceexpenseis:∗∗
A.∗∗12,000 in January
B. 1,000permonth∗∗C.∗∗1,000permonth∗∗C.∗∗0
D. $12,000 at year-end
Answer: B
Rationale: Prepaid insurance is an asset; 12,000/12=12,000/12=1,000 expense per
month.
16. Depreciation is an example of:
A. A cash expense
B. A non-cash expense
C. A revenue
D. A liability
Answer: B
Rationale: Depreciation allocates cost of an asset over its useful life without cash outflow
at the time of expense recognition.
17. A company purchases equipment for $50,000 cash. The effect on the accounting
equation is:
A. Assets increase and liabilities increase
B. Assets decrease and equity decreases
C. One asset increases, another asset decreases (no net change)
D. Liabilities decrease and equity increases
Answer: C
Rationale: Cash decreases, equipment increases; total assets unchanged.
18. A company borrows $20,000 from a bank. The effect on the accounting equation is:
A. Assets increase, liabilities increase
B. Assets decrease, liabilities decrease
C. Assets increase, equity increases
D. No change
Answer: A
Rationale: Cash (asset) increases; notes payable (liability) increases.
19. A company issues common stock for $10,000 cash. The effect on the accounting
equation is:
Final Actual Exam Questions with Correct
Answers & Explanations 2026 | Graded A+
Study Guide
Section 1: Accounting Foundations & Financial Statements (Questions 1 –50)
1. Which financial statement reports a company's financial position at a specific point in
time?
A. Income statement
B. Balance sheet
C. Statement of cash flows
D. Statement of retained earnings
Answer: B
Rationale: The balance sheet shows assets, liabilities, and equity at a specific date.
2. The accounting equation is:
A. Assets = Liabilities + Equity
B. Assets + Liabilities = Equity
C. Revenues – Expenses = Net Income
D. Assets = Revenues – Expenses
Answer: A
Rationale: Assets = Liabilities + Equity is the fundamental accounting equation.
3. Which of the following is an asset?
A. Accounts payable
B. Notes payable
C. Inventory
D. Common stock
Answer: C
Rationale: Inventory is a current asset; accounts payable and notes payable are
liabilities; common stock is equity.
4. Which of the following is a liability?
A. Cash
B. Equipment
C. Accounts receivable
D. Wages payable
,Answer: D
Rationale: Wages payable is an obligation to pay employees, a liability.
5. Retained earnings is classified as:
A. Asset
B. Liability
C. Equity
D. Revenue
Answer: C
Rationale: Retained earnings is part of shareholders' equity.
6. The income statement measures performance over a period of time.
A. True
B. False
Answer: A
Rationale: The income statement covers a period (month, quarter, year).
7. Net income is calculated as:
A. Revenues – Expenses
B. Assets – Liabilities
C. Cash inflows – Cash outflows
D. Sales – Cost of goods sold only
Answer: A
Rationale: Net income = total revenues – total expenses.
8. A company has revenues of 100,000andexpensesof100,000andexpensesof70,000.
Net income is:
A. 30,000∗∗B.∗∗30,000∗∗B.∗∗70,000
C. 100,000∗∗D.∗∗100,000∗∗D.∗∗170,000
Answer: A
Rationale: 100,000 – 70,000 = 30,000.
9. Which financial statement shows cash inflows and outflows from operating, investing,
and financing activities?
A. Balance sheet
B. Income statement
C. Statement of cash flows
D. Statement of changes in equity
Answer: C
Rationale: The statement of cash flows categorizes cash activities into operations,
investing, and financing.
,10. The cost principle requires assets to be recorded at:
A. Market value
B. Historical cost
C. Replacement cost
D. Net realizable value
Answer: B
Rationale: Historical cost is the original purchase price.
11. The going concern assumption means that:
A. The company will liquidate soon
B. The company will continue operating indefinitely
C. Assets are reported at market value
D. Liabilities are ignored
Answer: B
Rationale: Going concern assumes the business will continue to operate.
12. The matching principle requires that:
A. Expenses are recorded when cash is paid
B. Expenses are matched with the revenues they help generate
C. Revenues are recorded when cash is received
D. Assets equal liabilities
Answer: B
Rationale: Matching principle aligns expenses with related revenues.
13. Accrual accounting records revenues when:
A. Cash is received
B. Earned, regardless of cash receipt
C. Cash is paid
D. The order is placed
Answer: B
Rationale: Accrual accounting recognizes revenue when earned, not necessarily when
cash is received.
14. A company performs services in December but receives payment in January. Under
accrual accounting, when should revenue be recorded?
A. December
B. January
C. Split between December and January
D. At the end of the fiscal year
, Answer: A
Rationale: Revenue is recorded when earned (December), not when cash is received.
15. A company
pays 12,000foraone−yearinsurancepolicyonJanuary1.Themonthlyinsuranceexpenseis:∗∗
A.∗∗12,000foraone−yearinsurancepolicyonJanuary1.Themonthlyinsuranceexpenseis:∗∗
A.∗∗12,000 in January
B. 1,000permonth∗∗C.∗∗1,000permonth∗∗C.∗∗0
D. $12,000 at year-end
Answer: B
Rationale: Prepaid insurance is an asset; 12,000/12=12,000/12=1,000 expense per
month.
16. Depreciation is an example of:
A. A cash expense
B. A non-cash expense
C. A revenue
D. A liability
Answer: B
Rationale: Depreciation allocates cost of an asset over its useful life without cash outflow
at the time of expense recognition.
17. A company purchases equipment for $50,000 cash. The effect on the accounting
equation is:
A. Assets increase and liabilities increase
B. Assets decrease and equity decreases
C. One asset increases, another asset decreases (no net change)
D. Liabilities decrease and equity increases
Answer: C
Rationale: Cash decreases, equipment increases; total assets unchanged.
18. A company borrows $20,000 from a bank. The effect on the accounting equation is:
A. Assets increase, liabilities increase
B. Assets decrease, liabilities decrease
C. Assets increase, equity increases
D. No change
Answer: A
Rationale: Cash (asset) increases; notes payable (liability) increases.
19. A company issues common stock for $10,000 cash. The effect on the accounting
equation is:
