WGU C213 ACCOUNTING FOR DECISION MAKERS
250 Original Exam-Style Practice Questions with Answers • 2025/2026 Study Edition • Graded A+ Format
IMPORTANT: This is an original practice/exam-preparation bank, not a leaked or reproduced WGU Objective Assessment. No source can truthfully
guarantee that these are the current live exam questions. The questions below are built around C213 topic coverage identified from WGU/course
materials and current 2025/2026 study-resource listings, with calculations independently checked.
ACCOUNTING DECISION FRAMEWORK
ASSETS = LIABILITIES + EQUITY
resources obligations owners' claim
OPERATING INVESTING FINANCING
core business long-term assets debt/equity
Statement of Cash Flows: sources and uses of cash
Coverage emphasizes financial statements and analysis, accounting cycle and controls, cost behavior, CVP, budgeting, job-order/process/ABC costing, and
relevant-cost decision analysis.
QUESTIONS BEGIN
SECTION 1 — ACCOUNTING FUNDAMENTALS & FINANCIAL REPORTING
1. What is the primary purpose of accounting?
• To eliminate all business risk
✓ ■ To provide useful financial information for decision-making
• To guarantee profitability
• To replace management judgment
Answer: To provide useful financial information for decision-making Why: Accounting organizes financial information so users can
evaluate performance, financial position, and make informed decisions.
2. Which group is primarily an external user of financial accounting information?
• Production supervisors
• Department managers
✓ ■ Investors and lenders
• Warehouse employees
Answer: Investors and lenders Why: Financial accounting is designed mainly for users outside the organization, including investors and
creditors.
3. Bookkeeping is best described as:
WGU C213 • 250 Original Practice Questions • 2025/2026 Study Edition Page 1
, • The process of interpreting financial ratios
✓ ■ The systematic recording of financial transactions
• The process of auditing public companies
• The preparation of strategic plans
Answer: The systematic recording of financial transactions Why: Bookkeeping focuses on recording transactions; accounting includes
recording plus classification, analysis, and reporting.
4. Which three statements are the primary financial statements?
• Budget, forecast, and tax return
✓ ■ Balance sheet, income statement, and statement of cash flows
• Trial balance, journal, and ledger
• Invoice, purchase order, and receipt
Answer: Balance sheet, income statement, and statement of cash flows Why: The three core statements report financial position,
performance, and cash flows.
5. The balance sheet reports financial position:
• Over a period of time
✓ ■ At a specific point in time
• Only at year-end tax filing
• Only when cash changes
Answer: At a specific point in time Why: A balance sheet is a point-in-time statement of assets, liabilities, and equity.
6. The income statement primarily reports:
• Assets and liabilities at a point in time
✓ ■ Revenues, expenses, and resulting profit or loss over a period
• Only cash receipts
• Only owner investments
Answer: Revenues, expenses, and resulting profit or loss over a period Why: The income statement measures operating results over a
defined period.
7. The statement of cash flows focuses on:
• Profit only
✓ ■ Cash inflows and outflows during a period
• Inventory quantities only
• Accounts payable balances only
Answer: Cash inflows and outflows during a period Why: Cash flows are classified into operating, investing, and financing activities.
8. Which organization establishes U.S. GAAP for nongovernmental entities?
✓ ■ FASB
• SEC alone
• IRS
• PCAOB alone
Answer: FASB Why: The Financial Accounting Standards Board (FASB) establishes U.S. GAAP for nongovernmental entities.
9. Which organization has broad authority over U.S. securities markets and public-company reporting?
• FASB
✓ ■ SEC
• AICPA
• IRS
Answer: SEC Why: The Securities and Exchange Commission oversees securities markets and has authority over public-company
reporting.
WGU C213 • 250 Original Practice Questions • 2025/2026 Study Edition Page 2
, 10. The accounting equation is:
✓ ■ Assets = Liabilities + Equity
• Assets = Revenue − Expenses
• Equity = Assets + Liabilities
• Assets = Cash + Revenue
Answer: Assets = Liabilities + Equity Why: The fundamental equation is Assets = Liabilities + Owners' Equity.
11. If liabilities increase while assets remain unchanged, equity generally:
• Increases
✓ ■ Decreases
• Must increase by the same amount
• Is unaffected in every case
Answer: Decreases Why: From Assets = Liabilities + Equity, holding assets constant means an increase in liabilities reduces equity.
12. Which is an asset?
• Accounts payable
• Unearned revenue
✓ ■ Inventory
• Owner's capital
Answer: Inventory Why: Inventory is a resource controlled by the business and is therefore an asset.
13. Which is a liability?
• Accounts receivable
• Prepaid insurance
✓ ■ Accounts payable
• Retained earnings
Answer: Accounts payable Why: Accounts payable represents an obligation to suppliers.
14. Revenue is generally recognized under accrual accounting when it is:
• Always collected in cash
✓ ■ Earned under the applicable recognition criteria
• Budgeted by management
• Deposited in a bank account
Answer: Earned under the applicable recognition criteria Why: Accrual accounting recognizes revenue when earned, subject to the
applicable recognition rules.
15. Under accrual accounting, an expense is generally recognized when:
• Cash is always paid first
✓ ■ The related economic benefit is consumed or the obligation is incurred
• A budget is approved
• A purchase order is printed
Answer: The related economic benefit is consumed or the obligation is incurred Why: Accrual accounting records expenses in the period
in which they are incurred or the related benefits are consumed.
16. Which characteristic makes information useful because it can help predict or confirm outcomes?
✓ ■ Relevance
• Secrecy
• Uniformity
• Complexity
Answer: Relevance Why: Relevant information has predictive and/or confirmatory value.
WGU C213 • 250 Original Practice Questions • 2025/2026 Study Edition Page 3
, 17. Comparability helps users:
• Avoid using financial statements
✓ ■ Identify similarities and differences across entities or periods
• Guarantee identical accounting policies
• Eliminate estimates
Answer: Identify similarities and differences across entities or periods Why: Comparability supports meaningful evaluation across
companies and time.
18. Materiality refers to whether an omission or misstatement could:
• Change the font size
✓ ■ Influence users' decisions
• Increase cash automatically
• Eliminate liabilities
Answer: Influence users' decisions Why: Materiality depends on whether the information could reasonably influence decisions of
financial statement users.
19. An external audit is primarily intended to:
• Prepare management's budget
✓ ■ Provide independent assurance on financial statements
• Guarantee the company will be profitable
• Replace the accounting department
Answer: Provide independent assurance on financial statements Why: An independent auditor expresses an opinion about whether
financial statements are presented fairly under the applicable framework.
20. Which is normally a current asset?
• Land
✓ ■ Accounts receivable
• Long-term bonds payable
• Buildings
Answer: Accounts receivable Why: Accounts receivable is normally expected to be collected within the operating cycle or one year.
21. Which item is normally a noncurrent asset?
• Cash
• Inventory
✓ ■ Land
• Accounts receivable
Answer: Land Why: Land is generally held for long-term use and is classified as a noncurrent asset.
22. Retained earnings generally represents:
• Cash held in a bank account
✓ ■ Cumulative earnings retained in the business after distributions
• Total liabilities
• Gross revenue for the current month
Answer: Cumulative earnings retained in the business after distributions Why: Retained earnings accumulates net income less
dividends/distributions, subject to the accounting framework.
23. Which transaction increases both an asset and a liability?
• Paying accounts payable
✓ ■ Purchasing equipment on credit
• Collecting an account receivable
WGU C213 • 250 Original Practice Questions • 2025/2026 Study Edition Page 4
250 Original Exam-Style Practice Questions with Answers • 2025/2026 Study Edition • Graded A+ Format
IMPORTANT: This is an original practice/exam-preparation bank, not a leaked or reproduced WGU Objective Assessment. No source can truthfully
guarantee that these are the current live exam questions. The questions below are built around C213 topic coverage identified from WGU/course
materials and current 2025/2026 study-resource listings, with calculations independently checked.
ACCOUNTING DECISION FRAMEWORK
ASSETS = LIABILITIES + EQUITY
resources obligations owners' claim
OPERATING INVESTING FINANCING
core business long-term assets debt/equity
Statement of Cash Flows: sources and uses of cash
Coverage emphasizes financial statements and analysis, accounting cycle and controls, cost behavior, CVP, budgeting, job-order/process/ABC costing, and
relevant-cost decision analysis.
QUESTIONS BEGIN
SECTION 1 — ACCOUNTING FUNDAMENTALS & FINANCIAL REPORTING
1. What is the primary purpose of accounting?
• To eliminate all business risk
✓ ■ To provide useful financial information for decision-making
• To guarantee profitability
• To replace management judgment
Answer: To provide useful financial information for decision-making Why: Accounting organizes financial information so users can
evaluate performance, financial position, and make informed decisions.
2. Which group is primarily an external user of financial accounting information?
• Production supervisors
• Department managers
✓ ■ Investors and lenders
• Warehouse employees
Answer: Investors and lenders Why: Financial accounting is designed mainly for users outside the organization, including investors and
creditors.
3. Bookkeeping is best described as:
WGU C213 • 250 Original Practice Questions • 2025/2026 Study Edition Page 1
, • The process of interpreting financial ratios
✓ ■ The systematic recording of financial transactions
• The process of auditing public companies
• The preparation of strategic plans
Answer: The systematic recording of financial transactions Why: Bookkeeping focuses on recording transactions; accounting includes
recording plus classification, analysis, and reporting.
4. Which three statements are the primary financial statements?
• Budget, forecast, and tax return
✓ ■ Balance sheet, income statement, and statement of cash flows
• Trial balance, journal, and ledger
• Invoice, purchase order, and receipt
Answer: Balance sheet, income statement, and statement of cash flows Why: The three core statements report financial position,
performance, and cash flows.
5. The balance sheet reports financial position:
• Over a period of time
✓ ■ At a specific point in time
• Only at year-end tax filing
• Only when cash changes
Answer: At a specific point in time Why: A balance sheet is a point-in-time statement of assets, liabilities, and equity.
6. The income statement primarily reports:
• Assets and liabilities at a point in time
✓ ■ Revenues, expenses, and resulting profit or loss over a period
• Only cash receipts
• Only owner investments
Answer: Revenues, expenses, and resulting profit or loss over a period Why: The income statement measures operating results over a
defined period.
7. The statement of cash flows focuses on:
• Profit only
✓ ■ Cash inflows and outflows during a period
• Inventory quantities only
• Accounts payable balances only
Answer: Cash inflows and outflows during a period Why: Cash flows are classified into operating, investing, and financing activities.
8. Which organization establishes U.S. GAAP for nongovernmental entities?
✓ ■ FASB
• SEC alone
• IRS
• PCAOB alone
Answer: FASB Why: The Financial Accounting Standards Board (FASB) establishes U.S. GAAP for nongovernmental entities.
9. Which organization has broad authority over U.S. securities markets and public-company reporting?
• FASB
✓ ■ SEC
• AICPA
• IRS
Answer: SEC Why: The Securities and Exchange Commission oversees securities markets and has authority over public-company
reporting.
WGU C213 • 250 Original Practice Questions • 2025/2026 Study Edition Page 2
, 10. The accounting equation is:
✓ ■ Assets = Liabilities + Equity
• Assets = Revenue − Expenses
• Equity = Assets + Liabilities
• Assets = Cash + Revenue
Answer: Assets = Liabilities + Equity Why: The fundamental equation is Assets = Liabilities + Owners' Equity.
11. If liabilities increase while assets remain unchanged, equity generally:
• Increases
✓ ■ Decreases
• Must increase by the same amount
• Is unaffected in every case
Answer: Decreases Why: From Assets = Liabilities + Equity, holding assets constant means an increase in liabilities reduces equity.
12. Which is an asset?
• Accounts payable
• Unearned revenue
✓ ■ Inventory
• Owner's capital
Answer: Inventory Why: Inventory is a resource controlled by the business and is therefore an asset.
13. Which is a liability?
• Accounts receivable
• Prepaid insurance
✓ ■ Accounts payable
• Retained earnings
Answer: Accounts payable Why: Accounts payable represents an obligation to suppliers.
14. Revenue is generally recognized under accrual accounting when it is:
• Always collected in cash
✓ ■ Earned under the applicable recognition criteria
• Budgeted by management
• Deposited in a bank account
Answer: Earned under the applicable recognition criteria Why: Accrual accounting recognizes revenue when earned, subject to the
applicable recognition rules.
15. Under accrual accounting, an expense is generally recognized when:
• Cash is always paid first
✓ ■ The related economic benefit is consumed or the obligation is incurred
• A budget is approved
• A purchase order is printed
Answer: The related economic benefit is consumed or the obligation is incurred Why: Accrual accounting records expenses in the period
in which they are incurred or the related benefits are consumed.
16. Which characteristic makes information useful because it can help predict or confirm outcomes?
✓ ■ Relevance
• Secrecy
• Uniformity
• Complexity
Answer: Relevance Why: Relevant information has predictive and/or confirmatory value.
WGU C213 • 250 Original Practice Questions • 2025/2026 Study Edition Page 3
, 17. Comparability helps users:
• Avoid using financial statements
✓ ■ Identify similarities and differences across entities or periods
• Guarantee identical accounting policies
• Eliminate estimates
Answer: Identify similarities and differences across entities or periods Why: Comparability supports meaningful evaluation across
companies and time.
18. Materiality refers to whether an omission or misstatement could:
• Change the font size
✓ ■ Influence users' decisions
• Increase cash automatically
• Eliminate liabilities
Answer: Influence users' decisions Why: Materiality depends on whether the information could reasonably influence decisions of
financial statement users.
19. An external audit is primarily intended to:
• Prepare management's budget
✓ ■ Provide independent assurance on financial statements
• Guarantee the company will be profitable
• Replace the accounting department
Answer: Provide independent assurance on financial statements Why: An independent auditor expresses an opinion about whether
financial statements are presented fairly under the applicable framework.
20. Which is normally a current asset?
• Land
✓ ■ Accounts receivable
• Long-term bonds payable
• Buildings
Answer: Accounts receivable Why: Accounts receivable is normally expected to be collected within the operating cycle or one year.
21. Which item is normally a noncurrent asset?
• Cash
• Inventory
✓ ■ Land
• Accounts receivable
Answer: Land Why: Land is generally held for long-term use and is classified as a noncurrent asset.
22. Retained earnings generally represents:
• Cash held in a bank account
✓ ■ Cumulative earnings retained in the business after distributions
• Total liabilities
• Gross revenue for the current month
Answer: Cumulative earnings retained in the business after distributions Why: Retained earnings accumulates net income less
dividends/distributions, subject to the accounting framework.
23. Which transaction increases both an asset and a liability?
• Paying accounts payable
✓ ■ Purchasing equipment on credit
• Collecting an account receivable
WGU C213 • 250 Original Practice Questions • 2025/2026 Study Edition Page 4
