WGU C213 Accounting for Decision Makers 100 Original OA
Practice Questions with Answers and Rationales 2026/2027
1. Assets are $420,000 and liabilities are $175,000. What is equity?
A. $175,000
B. $245,000
C. $420,000
D. $595,000
Answer: B. $245,000
Rationale: Equity equals assets minus liabilities: $420,000 − $175,000 = $245,000.
2. Which statement reports financial position at a specific date?
A. Income statement
B. Cash flow statement
C. Balance sheet
D. Sales budget
Answer: C. Balance sheet
Rationale: The balance sheet reports assets, liabilities, and equity at a point in time.
3. Which statement reports revenues and expenses for a period?
A. Income statement
B. Balance sheet
C. Bank statement
D. Production budget
Answer: A. Income statement
Rationale: The income statement measures financial performance over a period.
4. A company performs $9,000 of services on account. Which accounts
increase?
A. Cash and liabilities
B. Receivables and revenue
C. Expenses and payables
D. Inventory and equity
Answer: B. Receivables and revenue
Rationale: Services earned on credit create a receivable and revenue.
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,5. A customer pays $4,000 before services begin. What is initially recorded?
A. Revenue
B. Unearned revenue
C. An expense
D. A receivable
Answer: B. Unearned revenue
Rationale: The payment creates an obligation to provide future services.
6. A company collects an existing receivable. What happens?
A. Cash and revenue increase
B. Cash increases and receivables decrease
C. Liabilities increase
D. Equity decreases
Answer: B. Cash increases and receivables decrease
Rationale: Collection exchanges one asset for another without creating new
revenue.
7. Equipment is purchased for $30,000 cash. What is the immediate effect on
total assets?
A. Increase $30,000
B. Decrease $30,000
C. No change
D. Increase $60,000
Answer: C. No change
Rationale: Equipment increases while cash decreases by the same amount.
8. A company borrows $20,000 from a bank. What increases?
A. Assets and liabilities
B. Assets and revenue
C. Expenses and equity
D. Revenue and liabilities
Answer: A. Assets and liabilities
Rationale: Cash increases along with the loan obligation.
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, 9. Which account normally has a debit balance?
A. Accounts payable
B. Service revenue
C. Cash
D. Common stock
Answer: C. Cash
Rationale: Assets normally have debit balances.
10. Which account normally has a credit balance?
A. Equipment
B. Rent expense
C. Dividends
D. Accounts payable
Answer: D. Accounts payable
Rationale: Liabilities normally have credit balances.
11. Under accrual accounting, revenue is generally recognized when what
occurs?
A. Cash arrives
B. Performance obligations are satisfied
C. A budget is approved
D. Dividends are paid
Answer: B. Performance obligations are satisfied
Rationale: Revenue recognition depends on performance rather than cash receipt
alone.
12. Employees earn $3,500 that remains unpaid at year end. What
adjustment is needed?
A. Debit wages expense and credit wages payable
B. Debit cash and credit revenue
C. Debit wages payable and credit cash
D. No entry
Answer: A. Debit wages expense and credit wages payable
Rationale: The company recognizes the incurred expense and unpaid liability.
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Practice Questions with Answers and Rationales 2026/2027
1. Assets are $420,000 and liabilities are $175,000. What is equity?
A. $175,000
B. $245,000
C. $420,000
D. $595,000
Answer: B. $245,000
Rationale: Equity equals assets minus liabilities: $420,000 − $175,000 = $245,000.
2. Which statement reports financial position at a specific date?
A. Income statement
B. Cash flow statement
C. Balance sheet
D. Sales budget
Answer: C. Balance sheet
Rationale: The balance sheet reports assets, liabilities, and equity at a point in time.
3. Which statement reports revenues and expenses for a period?
A. Income statement
B. Balance sheet
C. Bank statement
D. Production budget
Answer: A. Income statement
Rationale: The income statement measures financial performance over a period.
4. A company performs $9,000 of services on account. Which accounts
increase?
A. Cash and liabilities
B. Receivables and revenue
C. Expenses and payables
D. Inventory and equity
Answer: B. Receivables and revenue
Rationale: Services earned on credit create a receivable and revenue.
Page 1
,5. A customer pays $4,000 before services begin. What is initially recorded?
A. Revenue
B. Unearned revenue
C. An expense
D. A receivable
Answer: B. Unearned revenue
Rationale: The payment creates an obligation to provide future services.
6. A company collects an existing receivable. What happens?
A. Cash and revenue increase
B. Cash increases and receivables decrease
C. Liabilities increase
D. Equity decreases
Answer: B. Cash increases and receivables decrease
Rationale: Collection exchanges one asset for another without creating new
revenue.
7. Equipment is purchased for $30,000 cash. What is the immediate effect on
total assets?
A. Increase $30,000
B. Decrease $30,000
C. No change
D. Increase $60,000
Answer: C. No change
Rationale: Equipment increases while cash decreases by the same amount.
8. A company borrows $20,000 from a bank. What increases?
A. Assets and liabilities
B. Assets and revenue
C. Expenses and equity
D. Revenue and liabilities
Answer: A. Assets and liabilities
Rationale: Cash increases along with the loan obligation.
Page 2
, 9. Which account normally has a debit balance?
A. Accounts payable
B. Service revenue
C. Cash
D. Common stock
Answer: C. Cash
Rationale: Assets normally have debit balances.
10. Which account normally has a credit balance?
A. Equipment
B. Rent expense
C. Dividends
D. Accounts payable
Answer: D. Accounts payable
Rationale: Liabilities normally have credit balances.
11. Under accrual accounting, revenue is generally recognized when what
occurs?
A. Cash arrives
B. Performance obligations are satisfied
C. A budget is approved
D. Dividends are paid
Answer: B. Performance obligations are satisfied
Rationale: Revenue recognition depends on performance rather than cash receipt
alone.
12. Employees earn $3,500 that remains unpaid at year end. What
adjustment is needed?
A. Debit wages expense and credit wages payable
B. Debit cash and credit revenue
C. Debit wages payable and credit cash
D. No entry
Answer: A. Debit wages expense and credit wages payable
Rationale: The company recognizes the incurred expense and unpaid liability.
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