WGU C213 Accounting for Decision Makers –
150 Practice Questions with Verified Answers
2026/2027 Updated | A+ Graded with Detailed
Rationales
Section 1: The Nature & Purpose of Accounting (Questions 1-20)
Q1. Which of the following best defines "accounting"?
- a. The process of preparing tax returns for a business
✅
- b. The recording of day-to-day financial activities and organization into summary reports to
evaluate financial status
- c. The process of managing a company's stock portfolio
- d. The process of hiring and training employees
Rationale: Accounting involves recording day-to-day financial activities and organizing that
information into summary reports used to evaluate a company's financial status .
Q2. What is the primary difference between bookkeeping and accounting?
- a. Bookkeeping analyzes financial data; accounting only records transactions
✅
- b. Bookkeeping is the preservation of a systematic, quantitative record; accounting interprets
and summarizes that information
- c. Bookkeeping is for internal use; accounting is for external use
- d. There is no difference between the two
Rationale: Bookkeeping preserves a systematic, quantitative record of an activity, while
accounting involves interpreting and summarizing that information for decision-making .
Q3. Who are the primary users of financial accounting information?
✅
- a. Internal managers
- b. External users (investors, lenders, creditors)
- c. Employees only
- d. Suppliers
Rationale: Financial accounting information is primarily prepared for and used by external users
such as investors, lenders, and creditors .
Q4. What is managerial accounting primarily used for?
- a. External financial reporting
,- b. Internal decision-making by managers ✅
- c. Tax preparation only
- d. Auditing purposes
Rationale: Managerial accounting is designed for internal users to support decision-making,
planning, and control within the organization .
Q5. Which of the following is NOT one of the three primary financial statements?
- a. Balance Sheet
- b. Income Statement
✅
- c. Statement of Cash Flows
- d. Statement of Retained Earnings
Rationale: The three primary financial statements are the Balance Sheet, Income Statement,
and Statement of Cash Flows. The Statement of Retained Earnings is a separate but related
report .
Q6. Which private body establishes accounting rules in the United States?
✅
- a. SEC
- b. FASB (Financial Accounting Standards Board)
- c. AICPA
- d. IASB
Rationale: FASB is the private body established and supported by the U.S. business community,
financial analysts, and practicing accountants that establishes accounting rules in the U.S. .
Q7. What does GAAP stand for?
✅
- a. Government Accounting and Auditing Procedures
- b. Generally Accepted Accounting Principles
- c. General Accounting and Auditing Practices
- d. Global Accounting Assessment Program
Rationale: GAAP stands for Generally Accepted Accounting Principles, developed by
accounting rule-makers to standardize financial reporting .
Q8. What is the role of the Securities and Exchange Commission (SEC)?
✅
- a. To establish tax laws
- b. To regulate U.S. stock exchanges and ensure fair information environment for investors
- c. To develop international accounting standards
- d. To audit public companies
Rationale: The SEC regulates U.S. stock exchanges and seeks to create a fair information
environment in which investors can buy and sell stocks without fear that companies are hiding
or manipulating financial data .
, ✅
Q9. The International Accounting Standards Board (IASB) is responsible for:
- a. Developing worldwide accounting practices
- b. Regulating U.S. stock exchanges
- c. Auditing public companies
- d. Establishing U.S. tax laws
Rationale: IASB is charged with developing worldwide accounting practices and standards .
Q10. Which act of Congress resulted in increased federal oversight of the audit process?
✅
- a. Securities Act of 1933
- b. Sarbanes-Oxley Act
- c. Dodd-Frank Act
- d. Internal Revenue Act
Rationale: The Sarbanes-Oxley Act (SOX) increased federal oversight of the audit process,
creating the PCAOB and imposing stricter requirements on corporate governance and financial
reporting .
Q11. Who is the only person who can sign audit reports?
✅
- a. Any accountant
- b. Certified Public Accountant (CPA)
- c. Chief Financial Officer
- d. Internal auditor
Rationale: Only Certified Public Accountants (CPAs) are authorized to sign audit reports .
Q12. What does the AICPA establish?
- a. International accounting standards
✅
- b. Auditing standards, continuing education credits, CPA exam, and code of professional
conduct
- c. Tax regulations
- d. Stock exchange rules
Rationale: The American Institute of Certified Public Accountants (AICPA) sets auditing
standards, continuing education credits, CPA exam requirements, and the code of professional
conduct .
Q13. Which organization was created by the Sarbanes-Oxley Act?
✅
- a. FASB
- b. PCAOB (Public Company Accounting Oversight Board)
- c. SEC
- d. AICPA
, Rationale: The PCAOB was created by the Sarbanes-Oxley Act to oversee the audits of public
companies and is under the supervision of the SEC .
Q14. Why is providing financial statements beneficial for a borrower?
✅
- a. It guarantees loan approval
- b. It can result in a lower interest rate by reducing uncertainty for the lender
- c. It eliminates the need for collateral
- d. It extends the repayment period
Rationale: A borrower benefits from providing financial information regarding income and
expenses in the form of a lower interest rate on a loan because of reduced uncertainty for the
lender .
Q15. Which of the following is NOT a reason for the integration of worldwide accounting
standards?
- a. The globalization of investment markets
✅
- b. The desire for comparability among financial statements
- c. The theoretical necessity of a common set of accounting standards
- d. The reduction of international accounting confusion
Rationale: The integration of worldwide accounting standards is driven by practical needs
(globalization, comparability, reducing confusion), not a "theoretical necessity" .
Q16. Investors outside a company can access a company's internal database of financial
information and perform their own analysis.
✅
- a. True
- b. False
Rationale: With current information technology, investors still do not have access to a
company's internal database of financial information. They rely on publicly disclosed financial
statements .
Q17. Which of the following is a current trend causing changes in the accounting field?
✅
- a. Decreased regulation
- b. Increased use of technology and globalization of accounting standards
- c. Simplified financial reporting requirements
- d. Reduced demand for accounting professionals
Rationale: Current trends in accounting include the globalization of accounting standards (IFRS
adoption/convergence) and increased use of technology in financial reporting and analysis.
Q18. The Financial Accounting Standards Board (FASB) is a government agency.
✅
- a. True
- b. False
150 Practice Questions with Verified Answers
2026/2027 Updated | A+ Graded with Detailed
Rationales
Section 1: The Nature & Purpose of Accounting (Questions 1-20)
Q1. Which of the following best defines "accounting"?
- a. The process of preparing tax returns for a business
✅
- b. The recording of day-to-day financial activities and organization into summary reports to
evaluate financial status
- c. The process of managing a company's stock portfolio
- d. The process of hiring and training employees
Rationale: Accounting involves recording day-to-day financial activities and organizing that
information into summary reports used to evaluate a company's financial status .
Q2. What is the primary difference between bookkeeping and accounting?
- a. Bookkeeping analyzes financial data; accounting only records transactions
✅
- b. Bookkeeping is the preservation of a systematic, quantitative record; accounting interprets
and summarizes that information
- c. Bookkeeping is for internal use; accounting is for external use
- d. There is no difference between the two
Rationale: Bookkeeping preserves a systematic, quantitative record of an activity, while
accounting involves interpreting and summarizing that information for decision-making .
Q3. Who are the primary users of financial accounting information?
✅
- a. Internal managers
- b. External users (investors, lenders, creditors)
- c. Employees only
- d. Suppliers
Rationale: Financial accounting information is primarily prepared for and used by external users
such as investors, lenders, and creditors .
Q4. What is managerial accounting primarily used for?
- a. External financial reporting
,- b. Internal decision-making by managers ✅
- c. Tax preparation only
- d. Auditing purposes
Rationale: Managerial accounting is designed for internal users to support decision-making,
planning, and control within the organization .
Q5. Which of the following is NOT one of the three primary financial statements?
- a. Balance Sheet
- b. Income Statement
✅
- c. Statement of Cash Flows
- d. Statement of Retained Earnings
Rationale: The three primary financial statements are the Balance Sheet, Income Statement,
and Statement of Cash Flows. The Statement of Retained Earnings is a separate but related
report .
Q6. Which private body establishes accounting rules in the United States?
✅
- a. SEC
- b. FASB (Financial Accounting Standards Board)
- c. AICPA
- d. IASB
Rationale: FASB is the private body established and supported by the U.S. business community,
financial analysts, and practicing accountants that establishes accounting rules in the U.S. .
Q7. What does GAAP stand for?
✅
- a. Government Accounting and Auditing Procedures
- b. Generally Accepted Accounting Principles
- c. General Accounting and Auditing Practices
- d. Global Accounting Assessment Program
Rationale: GAAP stands for Generally Accepted Accounting Principles, developed by
accounting rule-makers to standardize financial reporting .
Q8. What is the role of the Securities and Exchange Commission (SEC)?
✅
- a. To establish tax laws
- b. To regulate U.S. stock exchanges and ensure fair information environment for investors
- c. To develop international accounting standards
- d. To audit public companies
Rationale: The SEC regulates U.S. stock exchanges and seeks to create a fair information
environment in which investors can buy and sell stocks without fear that companies are hiding
or manipulating financial data .
, ✅
Q9. The International Accounting Standards Board (IASB) is responsible for:
- a. Developing worldwide accounting practices
- b. Regulating U.S. stock exchanges
- c. Auditing public companies
- d. Establishing U.S. tax laws
Rationale: IASB is charged with developing worldwide accounting practices and standards .
Q10. Which act of Congress resulted in increased federal oversight of the audit process?
✅
- a. Securities Act of 1933
- b. Sarbanes-Oxley Act
- c. Dodd-Frank Act
- d. Internal Revenue Act
Rationale: The Sarbanes-Oxley Act (SOX) increased federal oversight of the audit process,
creating the PCAOB and imposing stricter requirements on corporate governance and financial
reporting .
Q11. Who is the only person who can sign audit reports?
✅
- a. Any accountant
- b. Certified Public Accountant (CPA)
- c. Chief Financial Officer
- d. Internal auditor
Rationale: Only Certified Public Accountants (CPAs) are authorized to sign audit reports .
Q12. What does the AICPA establish?
- a. International accounting standards
✅
- b. Auditing standards, continuing education credits, CPA exam, and code of professional
conduct
- c. Tax regulations
- d. Stock exchange rules
Rationale: The American Institute of Certified Public Accountants (AICPA) sets auditing
standards, continuing education credits, CPA exam requirements, and the code of professional
conduct .
Q13. Which organization was created by the Sarbanes-Oxley Act?
✅
- a. FASB
- b. PCAOB (Public Company Accounting Oversight Board)
- c. SEC
- d. AICPA
, Rationale: The PCAOB was created by the Sarbanes-Oxley Act to oversee the audits of public
companies and is under the supervision of the SEC .
Q14. Why is providing financial statements beneficial for a borrower?
✅
- a. It guarantees loan approval
- b. It can result in a lower interest rate by reducing uncertainty for the lender
- c. It eliminates the need for collateral
- d. It extends the repayment period
Rationale: A borrower benefits from providing financial information regarding income and
expenses in the form of a lower interest rate on a loan because of reduced uncertainty for the
lender .
Q15. Which of the following is NOT a reason for the integration of worldwide accounting
standards?
- a. The globalization of investment markets
✅
- b. The desire for comparability among financial statements
- c. The theoretical necessity of a common set of accounting standards
- d. The reduction of international accounting confusion
Rationale: The integration of worldwide accounting standards is driven by practical needs
(globalization, comparability, reducing confusion), not a "theoretical necessity" .
Q16. Investors outside a company can access a company's internal database of financial
information and perform their own analysis.
✅
- a. True
- b. False
Rationale: With current information technology, investors still do not have access to a
company's internal database of financial information. They rely on publicly disclosed financial
statements .
Q17. Which of the following is a current trend causing changes in the accounting field?
✅
- a. Decreased regulation
- b. Increased use of technology and globalization of accounting standards
- c. Simplified financial reporting requirements
- d. Reduced demand for accounting professionals
Rationale: Current trends in accounting include the globalization of accounting standards (IFRS
adoption/convergence) and increased use of technology in financial reporting and analysis.
Q18. The Financial Accounting Standards Board (FASB) is a government agency.
✅
- a. True
- b. False
