WGU C213 Accounting for Decision Makers Final OA Exam
Actual Exam 2026/2027 – Comprehensive Test with Detailed
Rationales | 100% Verified | Pass Guaranteed – A+ Graded
Section 1: The Nature and Purpose of Accounting (10 Questions)
Q1: A business owner uses the company's checking account to pay for personal
vacation expenses and records these as business travel costs. This practice violates
which fundamental accounting concept?
A. The revenue recognition principle, which specifies when revenue should be recorded
B. The cost principle, which requires transactions to be recorded at historical cost
C. The entity concept, which requires personal and business financial activities to be
kept separate [CORRECT]
D. The time period concept, which divides economic life into artificial time periods
Correct Answer: C
Rationale: The entity concept requires that the financial activities of a business be kept
separate from the personal financial activities of its owners. Commingling personal and
business expenses violates this fundamental concept and distorts financial reporting.
Q2: Under accrual accounting, a landscaping company completes a $5,000 project for a
client in December 2026 but does not receive payment until January 2027. When should
the company recognize the revenue?
A. January 2027, when cash is actually received
B. December 2026, when the work was completed and the revenue was earned
[CORRECT]
C. Over the 12 months of 2027, as the cash is used in operations
D. At the end of the fiscal year, regardless of when work was performed
Correct Answer: B
,Rationale: Under accrual accounting, revenue is recognized when it is earned (work has
been done) and collectability can be reasonably assured, not when cash is received. The
landscaping company earned the revenue in December 2026 when the project was
completed.
Q3: Which organization is primarily responsible for setting accounting standards in the
United States?
A. The Securities and Exchange Commission (SEC)
B. The Public Company Accounting Oversight Board (PCAOB)
C. The Financial Accounting Standards Board (FASB) [CORRECT]
D. The Internal Revenue Service (IRS)
Correct Answer: C
Rationale: The Financial Accounting Standards Board (FASB) is the primary
private-sector body responsible for establishing and improving generally accepted
accounting principles (GAAP) in the United States. The SEC has oversight authority but
delegates standard-setting to FASB.
Q4: A company discovers a potential lawsuit that could result in a $2 million loss. Under
the principle of conservatism, the company should:
A. Recognize the gain if the lawsuit is likely to be won
B. Recognize the loss in the financial statements if it is probable and estimable
[CORRECT]
C. Ignore the potential loss until the lawsuit is actually settled
D. Disclose the lawsuit only if the amount exceeds $5 million
Correct Answer: B
Rationale: The principle of conservatism requires that all losses be recognized when
probable and estimable, while gains are not recognized until realized. This approach
prevents overstating assets and income by requiring caution in financial reporting.
Q5: The Sarbanes-Oxley Act of 2002 was enacted primarily in response to:
,A. The 2008 financial crisis and banking failures
B. Major accounting scandals such as Enron and WorldCom in 2001 [CORRECT]
C. The introduction of international accounting standards
D. Changes in federal tax policy and revenue collection
Correct Answer: B
Rationale: The Sarbanes-Oxley Act (SOX) was enacted in response to major accounting
scandals in 2001, including Enron and WorldCom. It increased federal scrutiny of
financial statement production, established the PCAOB, and imposed stricter corporate
governance requirements.
Q6: Which regulatory body has the authority to inspect audit practices of registered
public accounting firms and can impose sanctions, including barring firms from auditing
SEC-registered companies?
A. The Financial Accounting Standards Board (FASB)
B. The Securities and Exchange Commission (SEC)
C. The Public Company Accounting Oversight Board (PCAOB) [CORRECT]
D. The American Institute of Certified Public Accountants (AICPA)
Correct Answer: C
Rationale: The PCAOB was established by the Sarbanes-Oxley Act to oversee the audits
of public companies. It inspects audit practices, investigates questionable practices,
and has the authority to impose sanctions, including banning firms from auditing
SEC-registered companies.
Q7: Comprehensive income includes net income plus or minus adjustments for changes
in wealth resulting from:
A. Only operating revenues and expenses
B. Changes in exchange rates, interest rates, or financial instrument values [CORRECT]
C. Cash dividends paid to shareholders
D. Changes in the par value of common stock
, Correct Answer: B
Rationale: Comprehensive income includes net income plus other items that bypass the
income statement, such as unrealized gains/losses from foreign currency translation,
changes in the fair value of certain financial instruments, and adjustments for pension
liabilities.
Q8: Under the revenue recognition principle, revenue should be recognized when:
A. Cash is received from the customer
B. The contract is signed and the order is placed
C. The work has been done and collectability can be reasonably assured [CORRECT]
D. The invoice is mailed to the customer
Correct Answer: C
Rationale: Under GAAP revenue recognition principles, revenue is recognized when it is
earned (the work has been done or goods have been delivered) and collectability can be
reasonably assured. This is the accrual basis of accounting, not the cash basis.
Q9: Which of the following is NOT a function of the Securities and Exchange
Commission (SEC)?
A. Regulating stock exchanges to ensure fair trading practices
B. Requiring periodic financial reporting from public companies
C. Setting specific accounting standards for all U.S. companies [CORRECT]
D. Creating a fair information environment for investors
Correct Answer: C
Rationale: While the SEC has oversight authority and can influence accounting
standards, it delegates the actual standard-setting to the FASB. The SEC's primary
functions include regulating stock exchanges, requiring periodic reporting, and ensuring
fair information environments, not setting specific accounting standards.
Q10: The materiality concept in accounting means that:
Actual Exam 2026/2027 – Comprehensive Test with Detailed
Rationales | 100% Verified | Pass Guaranteed – A+ Graded
Section 1: The Nature and Purpose of Accounting (10 Questions)
Q1: A business owner uses the company's checking account to pay for personal
vacation expenses and records these as business travel costs. This practice violates
which fundamental accounting concept?
A. The revenue recognition principle, which specifies when revenue should be recorded
B. The cost principle, which requires transactions to be recorded at historical cost
C. The entity concept, which requires personal and business financial activities to be
kept separate [CORRECT]
D. The time period concept, which divides economic life into artificial time periods
Correct Answer: C
Rationale: The entity concept requires that the financial activities of a business be kept
separate from the personal financial activities of its owners. Commingling personal and
business expenses violates this fundamental concept and distorts financial reporting.
Q2: Under accrual accounting, a landscaping company completes a $5,000 project for a
client in December 2026 but does not receive payment until January 2027. When should
the company recognize the revenue?
A. January 2027, when cash is actually received
B. December 2026, when the work was completed and the revenue was earned
[CORRECT]
C. Over the 12 months of 2027, as the cash is used in operations
D. At the end of the fiscal year, regardless of when work was performed
Correct Answer: B
,Rationale: Under accrual accounting, revenue is recognized when it is earned (work has
been done) and collectability can be reasonably assured, not when cash is received. The
landscaping company earned the revenue in December 2026 when the project was
completed.
Q3: Which organization is primarily responsible for setting accounting standards in the
United States?
A. The Securities and Exchange Commission (SEC)
B. The Public Company Accounting Oversight Board (PCAOB)
C. The Financial Accounting Standards Board (FASB) [CORRECT]
D. The Internal Revenue Service (IRS)
Correct Answer: C
Rationale: The Financial Accounting Standards Board (FASB) is the primary
private-sector body responsible for establishing and improving generally accepted
accounting principles (GAAP) in the United States. The SEC has oversight authority but
delegates standard-setting to FASB.
Q4: A company discovers a potential lawsuit that could result in a $2 million loss. Under
the principle of conservatism, the company should:
A. Recognize the gain if the lawsuit is likely to be won
B. Recognize the loss in the financial statements if it is probable and estimable
[CORRECT]
C. Ignore the potential loss until the lawsuit is actually settled
D. Disclose the lawsuit only if the amount exceeds $5 million
Correct Answer: B
Rationale: The principle of conservatism requires that all losses be recognized when
probable and estimable, while gains are not recognized until realized. This approach
prevents overstating assets and income by requiring caution in financial reporting.
Q5: The Sarbanes-Oxley Act of 2002 was enacted primarily in response to:
,A. The 2008 financial crisis and banking failures
B. Major accounting scandals such as Enron and WorldCom in 2001 [CORRECT]
C. The introduction of international accounting standards
D. Changes in federal tax policy and revenue collection
Correct Answer: B
Rationale: The Sarbanes-Oxley Act (SOX) was enacted in response to major accounting
scandals in 2001, including Enron and WorldCom. It increased federal scrutiny of
financial statement production, established the PCAOB, and imposed stricter corporate
governance requirements.
Q6: Which regulatory body has the authority to inspect audit practices of registered
public accounting firms and can impose sanctions, including barring firms from auditing
SEC-registered companies?
A. The Financial Accounting Standards Board (FASB)
B. The Securities and Exchange Commission (SEC)
C. The Public Company Accounting Oversight Board (PCAOB) [CORRECT]
D. The American Institute of Certified Public Accountants (AICPA)
Correct Answer: C
Rationale: The PCAOB was established by the Sarbanes-Oxley Act to oversee the audits
of public companies. It inspects audit practices, investigates questionable practices,
and has the authority to impose sanctions, including banning firms from auditing
SEC-registered companies.
Q7: Comprehensive income includes net income plus or minus adjustments for changes
in wealth resulting from:
A. Only operating revenues and expenses
B. Changes in exchange rates, interest rates, or financial instrument values [CORRECT]
C. Cash dividends paid to shareholders
D. Changes in the par value of common stock
, Correct Answer: B
Rationale: Comprehensive income includes net income plus other items that bypass the
income statement, such as unrealized gains/losses from foreign currency translation,
changes in the fair value of certain financial instruments, and adjustments for pension
liabilities.
Q8: Under the revenue recognition principle, revenue should be recognized when:
A. Cash is received from the customer
B. The contract is signed and the order is placed
C. The work has been done and collectability can be reasonably assured [CORRECT]
D. The invoice is mailed to the customer
Correct Answer: C
Rationale: Under GAAP revenue recognition principles, revenue is recognized when it is
earned (the work has been done or goods have been delivered) and collectability can be
reasonably assured. This is the accrual basis of accounting, not the cash basis.
Q9: Which of the following is NOT a function of the Securities and Exchange
Commission (SEC)?
A. Regulating stock exchanges to ensure fair trading practices
B. Requiring periodic financial reporting from public companies
C. Setting specific accounting standards for all U.S. companies [CORRECT]
D. Creating a fair information environment for investors
Correct Answer: C
Rationale: While the SEC has oversight authority and can influence accounting
standards, it delegates the actual standard-setting to the FASB. The SEC's primary
functions include regulating stock exchanges, requiring periodic reporting, and ensuring
fair information environments, not setting specific accounting standards.
Q10: The materiality concept in accounting means that:
