WGU C213 Accounting for Decision Makers Objective
Assessment Practice Test Actual 2025/2026 with
Detailed Rationales | 100% Verified | Pass Guaranteed –
A+ Graded
SECTION 1: Financial Accounting Concepts & Principles (10
questions)
Q1: Which accounting principle requires companies to record transactions at their
original acquisition cost?
A. Revenue recognition principle
B. Matching principle
C. Historical cost principle [CORRECT]
D. Full disclosure principle
Correct Answer: C
Rationale: Correct because the historical cost principle requires assets to be
recorded at the exchange price paid on the date of acquisition.
Q2: Under accrual basis accounting, revenue is recognized when:
A. Cash is received from the customer
B. The service is performed or goods are delivered [CORRECT]
C. The invoice is mailed to the customer
D. The customer places an order
Correct Answer: B
Rationale: Correct because the revenue recognition principle states revenue is
earned when the performance obligation is satisfied, regardless of cash collection
timing.
Q3: Which concept assumes that a business will continue operating indefinitely
rather than being liquidated?
A. Economic entity assumption
B. Monetary unit assumption
C. Going concern assumption [CORRECT]
,D. Periodicity assumption
Correct Answer: C
Rationale: Correct because the going concern assumption presumes the business
will continue operations into the foreseeable future, justifying long-term asset
capitalization and depreciation.
Q4: The matching principle requires that:
A. Assets be matched with liabilities on the balance sheet
B. Expenses be recorded in the same period as the revenues they help generate
[CORRECT]
C. Debits always equal credits
D. Cash inflows be matched with cash outflows
Correct Answer: B
Rationale: Correct because the matching principle directs that expenses be
recognized in the period when related revenues are earned, not necessarily when
cash is paid.
Q5: Which qualitative characteristic requires financial information to be capable of
making a difference in user decisions?
A. Faithful representation
B. Relevance [CORRECT]
C. Comparability
D. Timeliness
Correct Answer: B
Rationale: Correct because relevance means financial information is capable of
influencing decisions by having predictive value, confirmatory value, or both.
Q6: A company fails to record an accrued expense at year-end. What is the effect on
the financial statements?
A. Overstates net income and overstates liabilities
B. Overstates net income and understates liabilities [CORRECT]
C. Understates net income and overstates liabilities
D. Understates net income and understates liabilities
Correct Answer: B
Rationale: Correct because omitting an accrued expense understates expenses
(overstating net income) and fails to record the related liability (understating
liabilities).
, Q7: Which accounting assumption requires that business transactions be separated
from the personal transactions of the owners?
A. Going concern assumption
B. Economic entity assumption [CORRECT]
C. Monetary unit assumption
D. Periodicity assumption
Correct Answer: B
Rationale: Correct because the economic entity assumption requires that business
activities be kept separate and distinct from the personal financial activities of
owners.
Q8: The principle that requires financial statements to disclose all significant
information that would affect user understanding is the:
A. Conservatism principle
B. Materiality principle
C. Full disclosure principle [CORRECT]
D. Cost constraint
Correct Answer: C
Rationale: Correct because the full disclosure principle mandates that financial
reports include all information necessary for users to understand the company's
financial position and performance.
Q9: Which of the following is an application of the conservatism constraint?
A. Recording assets at their highest possible value
B. Recognizing revenue as early as possible
C. Recording inventory at the lower of cost or net realizable value [CORRECT]
D. Accelerating revenue recognition
Correct Answer: C
Rationale: Correct because conservatism guides accountants to choose the less
optimistic estimate when uncertainty exists, such as writing down inventory to net
realizable value.
Q10: Under accrual accounting, which transaction would be recorded before cash is
exchanged?
A. Cash sale to a customer
B. Payment of last month's utility bill
C. Services performed on account [CORRECT]
D. Purchase of supplies with cash
Correct Answer: C
Assessment Practice Test Actual 2025/2026 with
Detailed Rationales | 100% Verified | Pass Guaranteed –
A+ Graded
SECTION 1: Financial Accounting Concepts & Principles (10
questions)
Q1: Which accounting principle requires companies to record transactions at their
original acquisition cost?
A. Revenue recognition principle
B. Matching principle
C. Historical cost principle [CORRECT]
D. Full disclosure principle
Correct Answer: C
Rationale: Correct because the historical cost principle requires assets to be
recorded at the exchange price paid on the date of acquisition.
Q2: Under accrual basis accounting, revenue is recognized when:
A. Cash is received from the customer
B. The service is performed or goods are delivered [CORRECT]
C. The invoice is mailed to the customer
D. The customer places an order
Correct Answer: B
Rationale: Correct because the revenue recognition principle states revenue is
earned when the performance obligation is satisfied, regardless of cash collection
timing.
Q3: Which concept assumes that a business will continue operating indefinitely
rather than being liquidated?
A. Economic entity assumption
B. Monetary unit assumption
C. Going concern assumption [CORRECT]
,D. Periodicity assumption
Correct Answer: C
Rationale: Correct because the going concern assumption presumes the business
will continue operations into the foreseeable future, justifying long-term asset
capitalization and depreciation.
Q4: The matching principle requires that:
A. Assets be matched with liabilities on the balance sheet
B. Expenses be recorded in the same period as the revenues they help generate
[CORRECT]
C. Debits always equal credits
D. Cash inflows be matched with cash outflows
Correct Answer: B
Rationale: Correct because the matching principle directs that expenses be
recognized in the period when related revenues are earned, not necessarily when
cash is paid.
Q5: Which qualitative characteristic requires financial information to be capable of
making a difference in user decisions?
A. Faithful representation
B. Relevance [CORRECT]
C. Comparability
D. Timeliness
Correct Answer: B
Rationale: Correct because relevance means financial information is capable of
influencing decisions by having predictive value, confirmatory value, or both.
Q6: A company fails to record an accrued expense at year-end. What is the effect on
the financial statements?
A. Overstates net income and overstates liabilities
B. Overstates net income and understates liabilities [CORRECT]
C. Understates net income and overstates liabilities
D. Understates net income and understates liabilities
Correct Answer: B
Rationale: Correct because omitting an accrued expense understates expenses
(overstating net income) and fails to record the related liability (understating
liabilities).
, Q7: Which accounting assumption requires that business transactions be separated
from the personal transactions of the owners?
A. Going concern assumption
B. Economic entity assumption [CORRECT]
C. Monetary unit assumption
D. Periodicity assumption
Correct Answer: B
Rationale: Correct because the economic entity assumption requires that business
activities be kept separate and distinct from the personal financial activities of
owners.
Q8: The principle that requires financial statements to disclose all significant
information that would affect user understanding is the:
A. Conservatism principle
B. Materiality principle
C. Full disclosure principle [CORRECT]
D. Cost constraint
Correct Answer: C
Rationale: Correct because the full disclosure principle mandates that financial
reports include all information necessary for users to understand the company's
financial position and performance.
Q9: Which of the following is an application of the conservatism constraint?
A. Recording assets at their highest possible value
B. Recognizing revenue as early as possible
C. Recording inventory at the lower of cost or net realizable value [CORRECT]
D. Accelerating revenue recognition
Correct Answer: C
Rationale: Correct because conservatism guides accountants to choose the less
optimistic estimate when uncertainty exists, such as writing down inventory to net
realizable value.
Q10: Under accrual accounting, which transaction would be recorded before cash is
exchanged?
A. Cash sale to a customer
B. Payment of last month's utility bill
C. Services performed on account [CORRECT]
D. Purchase of supplies with cash
Correct Answer: C
