WGU C213 ACCOUNTING FOR
DECISION MAKERS COMPREHENSIVE
EXAM
1. Which of the following describes the fundamental accounting equation?
A. Assets = Liabilities + Owner’s Equity
B. Assets = Liabilities - Owner’s Equity
C. Net Income = Revenue - Expenses
D. Assets + Liabilities = Owner’s Equity
Answer: A
Conceptual Explanation: The fundamental accounting equation is Assets = Liabilities +
Owner’s Equity, representing that all resources owned by a company are financed by either
debt or equity.
2. Under accrual accounting, when is revenue typically recognized?
A. When cash is received from the customer
B. When the performance obligation is satisfied
C. When the contract is signed by both parties
,D. At the end of the fiscal year
Answer: B
Conceptual Explanation: Accrual accounting recognizes revenue when it is earned
(performance obligation satisfied), regardless of when the cash is actually received.
3. What is the primary purpose of the Statement of Cash Flows?
A. To show the profitability of the company over a period
B. To provide information about cash receipts and cash payments
C. To list the assets and liabilities at a specific point in time
D. To detail the changes in retained earnings
Answer: B
Conceptual Explanation: The Statement of Cash Flows tracks the sources and uses of cash
during a period, categorized into operating, investing, and financing activities.
4. Which financial statement is considered a ‘snapshot’ in time?
A. Balance Sheet
B. Income Statement
C. Statement of Retained Earnings
D. Statement of Cash Flows
Answer: A
, Conceptual Explanation: The Balance Sheet reports the financial position of a company at
a specific date, unlike other statements that cover a period of time.
5. A company purchases equipment for $10,000 cash. How does this affect the accounting
equation?
A. Total assets increase by $10,000
B. Total assets remain unchanged
C. Total assets decrease by $10,000
D. Liabilities increase by $10,000
Answer: B
Conceptual Explanation: This is an asset exchange. Cash (an asset) decreases by $10,000
and Equipment (an asset) increases by $10,000, leaving total assets unchanged.
6. Which ratio measures a company’s ability to pay its short-term obligations with its most
liquid assets?
A. Debt-to-Equity Ratio
B. Return on Assets
C. Inventory Turnover
D. Quick Ratio
Answer: D
DECISION MAKERS COMPREHENSIVE
EXAM
1. Which of the following describes the fundamental accounting equation?
A. Assets = Liabilities + Owner’s Equity
B. Assets = Liabilities - Owner’s Equity
C. Net Income = Revenue - Expenses
D. Assets + Liabilities = Owner’s Equity
Answer: A
Conceptual Explanation: The fundamental accounting equation is Assets = Liabilities +
Owner’s Equity, representing that all resources owned by a company are financed by either
debt or equity.
2. Under accrual accounting, when is revenue typically recognized?
A. When cash is received from the customer
B. When the performance obligation is satisfied
C. When the contract is signed by both parties
,D. At the end of the fiscal year
Answer: B
Conceptual Explanation: Accrual accounting recognizes revenue when it is earned
(performance obligation satisfied), regardless of when the cash is actually received.
3. What is the primary purpose of the Statement of Cash Flows?
A. To show the profitability of the company over a period
B. To provide information about cash receipts and cash payments
C. To list the assets and liabilities at a specific point in time
D. To detail the changes in retained earnings
Answer: B
Conceptual Explanation: The Statement of Cash Flows tracks the sources and uses of cash
during a period, categorized into operating, investing, and financing activities.
4. Which financial statement is considered a ‘snapshot’ in time?
A. Balance Sheet
B. Income Statement
C. Statement of Retained Earnings
D. Statement of Cash Flows
Answer: A
, Conceptual Explanation: The Balance Sheet reports the financial position of a company at
a specific date, unlike other statements that cover a period of time.
5. A company purchases equipment for $10,000 cash. How does this affect the accounting
equation?
A. Total assets increase by $10,000
B. Total assets remain unchanged
C. Total assets decrease by $10,000
D. Liabilities increase by $10,000
Answer: B
Conceptual Explanation: This is an asset exchange. Cash (an asset) decreases by $10,000
and Equipment (an asset) increases by $10,000, leaving total assets unchanged.
6. Which ratio measures a company’s ability to pay its short-term obligations with its most
liquid assets?
A. Debt-to-Equity Ratio
B. Return on Assets
C. Inventory Turnover
D. Quick Ratio
Answer: D
