WGU C213 ACCOUNTING FOR
DECISION MAKERS EXAM GUIDE
QUESTIONS AND ANSWERS
1. Which accounting principle requires that expenses incurred to generate revenue be
recognized in the same period as the revenue?
A. Revenue Recognition Principle
B. Matching Principle
C. Cost Principle
D. Full Disclosure Principle
Answer: B
Conceptual Explanation: The matching principle states that all expenses must be matched
in the same accounting period as the revenues they helped to earn.
2. If a company purchases equipment for $50,000 using $10,000 cash and a $40,000 note
payable, how is the accounting equation affected?
A. Assets increase by $50,000; Liabilities increase by $40,000; Equity increases by $10,000
B. Assets increase by $40,000; Liabilities increase by $40,000; Equity remains unchanged
,C. Assets increase by $50,000; Liabilities increase by $50,000; Equity remains unchanged
D. Assets increase by $40,000; Liabilities increase by $50,000; Equity decreases by $10,000
Answer: B
Conceptual Explanation: Equipment (Asset) increases by $50,000 and Cash (Asset)
decreases by $10,000, resulting in a net asset increase of $40,000. Liabilities (Note Payable)
increase by $40,000.
3. Under the accrual basis of accounting, when is revenue generally recognized?
A. When cash is received from the customer
B. When the purchase order is received
C. At the end of the fiscal year
D. When the performance obligation is satisfied
Answer: D
Conceptual Explanation: Accrual accounting recognizes revenue when it is earned
(performance obligation satisfied), regardless of when cash is exchanged.
4. Which financial statement reports a company’s financial position at a specific point in
time?
A. Balance Sheet
B. Statement of Retained Earnings
C. Income Statement
, D. Statement of Cash Flows
Answer: A
Conceptual Explanation: The Balance Sheet provides a snapshot of assets, liabilities, and
equity at a specific point in time.
5. In a period of rising prices, which inventory valuation method results in the highest net
income?
A. FIFO (First-In, First-Out)
B. LIFO (Last-In, First-Out)
C. Weighted Average Cost
D. Specific Identification
Answer: A
Conceptual Explanation: FIFO assigns the older, lower costs to COGS, resulting in a higher
net income when prices are rising.
6. Which of the following is considered an ‘Investing Activity’ on the Statement of Cash
Flows?
A. Payment of dividends
B. Issuance of common stock
C. Collection of accounts receivable
D. Sale of a piece of manufacturing equipment
DECISION MAKERS EXAM GUIDE
QUESTIONS AND ANSWERS
1. Which accounting principle requires that expenses incurred to generate revenue be
recognized in the same period as the revenue?
A. Revenue Recognition Principle
B. Matching Principle
C. Cost Principle
D. Full Disclosure Principle
Answer: B
Conceptual Explanation: The matching principle states that all expenses must be matched
in the same accounting period as the revenues they helped to earn.
2. If a company purchases equipment for $50,000 using $10,000 cash and a $40,000 note
payable, how is the accounting equation affected?
A. Assets increase by $50,000; Liabilities increase by $40,000; Equity increases by $10,000
B. Assets increase by $40,000; Liabilities increase by $40,000; Equity remains unchanged
,C. Assets increase by $50,000; Liabilities increase by $50,000; Equity remains unchanged
D. Assets increase by $40,000; Liabilities increase by $50,000; Equity decreases by $10,000
Answer: B
Conceptual Explanation: Equipment (Asset) increases by $50,000 and Cash (Asset)
decreases by $10,000, resulting in a net asset increase of $40,000. Liabilities (Note Payable)
increase by $40,000.
3. Under the accrual basis of accounting, when is revenue generally recognized?
A. When cash is received from the customer
B. When the purchase order is received
C. At the end of the fiscal year
D. When the performance obligation is satisfied
Answer: D
Conceptual Explanation: Accrual accounting recognizes revenue when it is earned
(performance obligation satisfied), regardless of when cash is exchanged.
4. Which financial statement reports a company’s financial position at a specific point in
time?
A. Balance Sheet
B. Statement of Retained Earnings
C. Income Statement
, D. Statement of Cash Flows
Answer: A
Conceptual Explanation: The Balance Sheet provides a snapshot of assets, liabilities, and
equity at a specific point in time.
5. In a period of rising prices, which inventory valuation method results in the highest net
income?
A. FIFO (First-In, First-Out)
B. LIFO (Last-In, First-Out)
C. Weighted Average Cost
D. Specific Identification
Answer: A
Conceptual Explanation: FIFO assigns the older, lower costs to COGS, resulting in a higher
net income when prices are rising.
6. Which of the following is considered an ‘Investing Activity’ on the Statement of Cash
Flows?
A. Payment of dividends
B. Issuance of common stock
C. Collection of accounts receivable
D. Sale of a piece of manufacturing equipment
