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WGU C213 ACCOUNTING FOR DECISION MAKERS
2026 QUESTIONS LATEST VERSION QUESTIONS AND
ANSWERS
WGU C213 Accounting for Decision Makers — 250 Practice Questions with Rationales
SECTION 1: FINANCIAL ACCOUNTING FOUNDATIONS (Questions 1-25)
1. What is the correct definition of accounting?
• A. The preservation of a systematic, quantitative record of an activity
• B. The recording of the day-to-day financial activities of a company and the
organization of that information into summary reports used to evaluate the company's
financial status
• C. The process of preparing tax returns for individuals and businesses
• D. The analysis of stock market trends for investment purposes
Answer: B
Rationale: Accounting is defined as the recording of day-to-day financial activities and the
organization of that information into summary reports used to evaluate the company's
financial status. Bookkeeping is the narrower preservation of a systematic, quantitative record
of activity .
2. What is the difference between accounting and bookkeeping?
• A. There is no difference; the terms are interchangeable
• B. Bookkeeping is a subset of accounting that focuses on record preservation
• C. Accounting focuses only on tax preparation
• D. Bookkeeping involves financial statement analysis
Answer: B
Rationale: Bookkeeping is the preservation of a systematic, quantitative record of an
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activity, while accounting encompasses the broader process of recording financial activities
and organizing information into summary reports . Bookkeeping is a necessary component of
the accounting system but does not include the analysis and interpretation functions.
3. The accounting equation is:
• A. Assets = Liabilities - Owner's Equity
• B. Assets + Liabilities = Owner's Equity
• C. Assets = Liabilities + Owner's Equity
• D. Assets + Owner's Equity = Liabilities
Answer: C
Rationale: The fundamental accounting equation is Assets = Liabilities + Owner's Equity .
This equation is the foundation of the double-entry bookkeeping system and must always
remain in balance .
4. Owner's equity represents:
• A. The company's total assets
• B. The residual interest in the net assets of a company
• C. The company's total liabilities
• D. The company's total revenue
Answer: B
Rationale: Owner's equity (stockholders' equity) is the residual interest in the net assets of a
company after deducting liabilities . It represents the owners' claim on the company's assets.
5. Which private body establishes accounting rules in the United States?
• A. The Securities and Exchange Commission (SEC)
• B. The Financial Accounting Standards Board (FASB)
• C. The Internal Revenue Service (IRS)
• D. The Public Company Accounting Oversight Board (PCAOB)
Answer: B
Rationale: The Financial Accounting Standards Board (FASB) is the private body that
establishes accounting rules in the U.S. . It was established and is supported by the joint
efforts of the U.S. business community, financial analysts, and practicing accountants.
6. The Public Company Accounting Oversight Board (PCAOB) was created by:
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• A. The Securities Exchange Act of 1934
• B. The Sarbanes-Oxley Act
• C. The Internal Revenue Code
• D. The FASB Codification
Answer: B
Rationale: The PCAOB was created by the Sarbanes-Oxley Act of 2002 in response to major
accounting scandals . It increased auditor rules, made senior executives take personal
responsibility for financial reports, enhanced financial disclosures, and increased penalties for
white-collar crime .
7. Which organization regulates U.S. stock exchanges and seeks to create a fair
information environment for investors?
• A. The Financial Accounting Standards Board (FASB)
• B. The Securities and Exchange Commission (SEC)
• C. The Internal Revenue Service (IRS)
• D. The International Accounting Standards Board (IASB)
Answer: B
Rationale: The Securities and Exchange Commission (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 .
8. Which of the following is NOT a key factor that has made this a time of significant
change in accounting?
• A. Rapid advancements in information technology
• B. The international integration of worldwide business
• C. Increased scrutiny associated with large corporate accounting scandals
• D. A decrease in the number of publicly traded companies
Answer: D
Rationale: The three factors that have combined to make this a time of significant change in
accounting are rapid advancements in IT, the international integration of worldwide business,
and increased scrutiny associated with large corporate accounting scandals . A decrease in
publicly traded companies is not a driving factor.
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9. A company following U.S. GAAP prepares financial statements that are primarily
intended for:
• A. Internal management decision-making
• B. External users such as investors and creditors
• C. Tax preparation purposes
• D. Internal budgeting processes
Answer: B
Rationale: Financial accounting information is primarily prepared for external users such as
investors, creditors, and regulatory agencies . Managerial accounting is designed for internal
users.
10. The two types of fraud identified in accounting are:
• A. Asset misappropriation and fraudulent financial reporting
• B. Tax fraud and securities fraud
• C. Internal fraud and external fraud
• D. Accounting fraud and auditing fraud
Answer: A
Rationale: The two types of fraud are misappropriation of assets (stealing) and fraudulent
financial reporting (lying) . Asset misappropriation involves theft of company resources,
while fraudulent financial reporting involves intentional misrepresentation of financial
statements.
11. Earnings management refers to:
• A. The strategic choice of accounting estimates and judgments to meet predetermined
financial statement targets
• B. The accidental misstatement of financial information
• C. The preparation of tax returns
• D. The management of employee compensation
Answer: A
Rationale: Earnings management is the strategic choice of accounting estimates and
judgments in order to meet predetermined financial statement targets . Managers may manage
earnings to meet internal targets, meet external expectations, smooth income, or "window
dress" for an initial public offering (IPO) or loan .
WGU C213 ACCOUNTING FOR DECISION MAKERS
2026 QUESTIONS LATEST VERSION QUESTIONS AND
ANSWERS
WGU C213 Accounting for Decision Makers — 250 Practice Questions with Rationales
SECTION 1: FINANCIAL ACCOUNTING FOUNDATIONS (Questions 1-25)
1. What is the correct definition of accounting?
• A. The preservation of a systematic, quantitative record of an activity
• B. The recording of the day-to-day financial activities of a company and the
organization of that information into summary reports used to evaluate the company's
financial status
• C. The process of preparing tax returns for individuals and businesses
• D. The analysis of stock market trends for investment purposes
Answer: B
Rationale: Accounting is defined as the recording of day-to-day financial activities and the
organization of that information into summary reports used to evaluate the company's
financial status. Bookkeeping is the narrower preservation of a systematic, quantitative record
of activity .
2. What is the difference between accounting and bookkeeping?
• A. There is no difference; the terms are interchangeable
• B. Bookkeeping is a subset of accounting that focuses on record preservation
• C. Accounting focuses only on tax preparation
• D. Bookkeeping involves financial statement analysis
Answer: B
Rationale: Bookkeeping is the preservation of a systematic, quantitative record of an
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activity, while accounting encompasses the broader process of recording financial activities
and organizing information into summary reports . Bookkeeping is a necessary component of
the accounting system but does not include the analysis and interpretation functions.
3. The accounting equation is:
• A. Assets = Liabilities - Owner's Equity
• B. Assets + Liabilities = Owner's Equity
• C. Assets = Liabilities + Owner's Equity
• D. Assets + Owner's Equity = Liabilities
Answer: C
Rationale: The fundamental accounting equation is Assets = Liabilities + Owner's Equity .
This equation is the foundation of the double-entry bookkeeping system and must always
remain in balance .
4. Owner's equity represents:
• A. The company's total assets
• B. The residual interest in the net assets of a company
• C. The company's total liabilities
• D. The company's total revenue
Answer: B
Rationale: Owner's equity (stockholders' equity) is the residual interest in the net assets of a
company after deducting liabilities . It represents the owners' claim on the company's assets.
5. Which private body establishes accounting rules in the United States?
• A. The Securities and Exchange Commission (SEC)
• B. The Financial Accounting Standards Board (FASB)
• C. The Internal Revenue Service (IRS)
• D. The Public Company Accounting Oversight Board (PCAOB)
Answer: B
Rationale: The Financial Accounting Standards Board (FASB) is the private body that
establishes accounting rules in the U.S. . It was established and is supported by the joint
efforts of the U.S. business community, financial analysts, and practicing accountants.
6. The Public Company Accounting Oversight Board (PCAOB) was created by:
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• A. The Securities Exchange Act of 1934
• B. The Sarbanes-Oxley Act
• C. The Internal Revenue Code
• D. The FASB Codification
Answer: B
Rationale: The PCAOB was created by the Sarbanes-Oxley Act of 2002 in response to major
accounting scandals . It increased auditor rules, made senior executives take personal
responsibility for financial reports, enhanced financial disclosures, and increased penalties for
white-collar crime .
7. Which organization regulates U.S. stock exchanges and seeks to create a fair
information environment for investors?
• A. The Financial Accounting Standards Board (FASB)
• B. The Securities and Exchange Commission (SEC)
• C. The Internal Revenue Service (IRS)
• D. The International Accounting Standards Board (IASB)
Answer: B
Rationale: The Securities and Exchange Commission (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 .
8. Which of the following is NOT a key factor that has made this a time of significant
change in accounting?
• A. Rapid advancements in information technology
• B. The international integration of worldwide business
• C. Increased scrutiny associated with large corporate accounting scandals
• D. A decrease in the number of publicly traded companies
Answer: D
Rationale: The three factors that have combined to make this a time of significant change in
accounting are rapid advancements in IT, the international integration of worldwide business,
and increased scrutiny associated with large corporate accounting scandals . A decrease in
publicly traded companies is not a driving factor.
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9. A company following U.S. GAAP prepares financial statements that are primarily
intended for:
• A. Internal management decision-making
• B. External users such as investors and creditors
• C. Tax preparation purposes
• D. Internal budgeting processes
Answer: B
Rationale: Financial accounting information is primarily prepared for external users such as
investors, creditors, and regulatory agencies . Managerial accounting is designed for internal
users.
10. The two types of fraud identified in accounting are:
• A. Asset misappropriation and fraudulent financial reporting
• B. Tax fraud and securities fraud
• C. Internal fraud and external fraud
• D. Accounting fraud and auditing fraud
Answer: A
Rationale: The two types of fraud are misappropriation of assets (stealing) and fraudulent
financial reporting (lying) . Asset misappropriation involves theft of company resources,
while fraudulent financial reporting involves intentional misrepresentation of financial
statements.
11. Earnings management refers to:
• A. The strategic choice of accounting estimates and judgments to meet predetermined
financial statement targets
• B. The accidental misstatement of financial information
• C. The preparation of tax returns
• D. The management of employee compensation
Answer: A
Rationale: Earnings management is the strategic choice of accounting estimates and
judgments in order to meet predetermined financial statement targets . Managers may manage
earnings to meet internal targets, meet external expectations, smooth income, or "window
dress" for an initial public offering (IPO) or loan .
