WGU C213 – ACCOUNTING FOR DECISION MAKERS EXAM
QUESTIONS AND 100% CORRECT ANSWERS RECENTLY
UPDATED
300 QUESTIONS AND ANSWERS
1. What is accounting? Accounting is the process of identifying, measuring,
recording, and communicating financial information about a business entity to
enable informed decision-making by its users.
2. What are the two main branches of accounting? Financial accounting
(external reporting) and managerial accounting (internal decision-making).
3. Who are the primary users of financial accounting information? External
users including investors, creditors, regulators, customers, and suppliers.
4. Who are the primary users of managerial accounting information?
Internal users including managers, executives, and employees who need
information for planning, controlling, and decision-making.
5. What is the fundamental accounting equation? Assets = Liabilities +
Owners' Equity
6. Define assets. Resources owned by a company that have economic value and
are expected to provide future benefits.
7. Define liabilities. Debts or obligations that a company owes to external
parties.
8. Define owners' equity. The residual interest in the assets of an entity after
deducting liabilities; represents the owners' claim on company assets.
9. What are the four primary financial statements? Income Statement,
Balance Sheet, Statement of Cash Flows, and Statement of Owners' Equity.
10. What is the purpose of the income statement? To show a company's
revenues, expenses, and net income or loss over a specific period of time.
,Chapter 2: Financial Statements
11. What is the purpose of the balance sheet? To show a company's financial
position at a specific point in time by listing assets, liabilities, and owners'
equity.
12. What is the purpose of the statement of cash flows? To show how cash
flows in and out of a company during a specific period, categorized into
operating, investing, and financing activities.
13. What are the three sections of the statement of cash flows? Operating
activities, investing activities, and financing activities.
14. What is working capital? Current assets minus current liabilities; measures
a company's short-term liquidity.
15. What is the difference between current and non-current assets? Current
assets are expected to be converted to cash within one year, while non-current
assets are held for longer periods.
16. What is the difference between current and non-current liabilities?
Current liabilities are due within one year, while non-current liabilities are due
after one year.
17. What is depreciation? The systematic allocation of the cost of a long-term
asset over its useful life.
18. What is the difference between revenue and cash receipts? Revenue is
earned when goods are sold or services are provided, while cash receipts occur
when cash is actually received.
19. What is the accrual basis of accounting? Recording transactions when
they occur, regardless of when cash is exchanged.
20. What is the cash basis of accounting? Recording transactions only when
cash is received or paid.
Chapter 3: Cost Concepts
21. What is a cost? A cost is the monetary value of resources given up to
acquire goods or services.
22. What is the difference between direct and indirect costs? Direct costs
can be easily traced to a specific cost object, while indirect costs cannot be
easily traced and must be allocated.
, 23. What are variable costs? Costs that change in total in direct proportion to
changes in activity level.
24. What are fixed costs? Costs that remain constant in total regardless of
changes in activity level within the relevant range.
25. What are mixed costs? Costs that contain both fixed and variable
components.
26. What is the relevant range? The range of activity levels over which cost
behavior assumptions are valid.
27. What is a cost driver? A factor that causes or influences the incurrence of a
cost.
28. What is the difference between product costs and period costs? Product
costs are capitalized as inventory and expensed when sold, while period costs
are expensed in the period incurred.
29. What are the three components of product costs in manufacturing?
Direct materials, direct labor, and manufacturing overhead.
30. What is manufacturing overhead? All manufacturing costs except direct
materials and direct labor.
Chapter 4: Cost-Volume-Profit Analysis
31. What is cost-volume-profit (CVP) analysis? A method of analyzing the
relationship between costs, volume, and profits to make informed business
decisions.
32. What is the contribution margin? Sales revenue minus variable costs; the
amount available to cover fixed costs and provide profit.
33. What is the contribution margin ratio? Contribution margin divided by
sales revenue; shows the percentage of each sales dollar available to cover fixed
costs.
34. What is the break-even point? The level of sales at which total revenues
equal total costs, resulting in zero profit or loss.
35. How do you calculate the break-even point in units? Fixed Costs ÷
Contribution Margin per Unit
QUESTIONS AND 100% CORRECT ANSWERS RECENTLY
UPDATED
300 QUESTIONS AND ANSWERS
1. What is accounting? Accounting is the process of identifying, measuring,
recording, and communicating financial information about a business entity to
enable informed decision-making by its users.
2. What are the two main branches of accounting? Financial accounting
(external reporting) and managerial accounting (internal decision-making).
3. Who are the primary users of financial accounting information? External
users including investors, creditors, regulators, customers, and suppliers.
4. Who are the primary users of managerial accounting information?
Internal users including managers, executives, and employees who need
information for planning, controlling, and decision-making.
5. What is the fundamental accounting equation? Assets = Liabilities +
Owners' Equity
6. Define assets. Resources owned by a company that have economic value and
are expected to provide future benefits.
7. Define liabilities. Debts or obligations that a company owes to external
parties.
8. Define owners' equity. The residual interest in the assets of an entity after
deducting liabilities; represents the owners' claim on company assets.
9. What are the four primary financial statements? Income Statement,
Balance Sheet, Statement of Cash Flows, and Statement of Owners' Equity.
10. What is the purpose of the income statement? To show a company's
revenues, expenses, and net income or loss over a specific period of time.
,Chapter 2: Financial Statements
11. What is the purpose of the balance sheet? To show a company's financial
position at a specific point in time by listing assets, liabilities, and owners'
equity.
12. What is the purpose of the statement of cash flows? To show how cash
flows in and out of a company during a specific period, categorized into
operating, investing, and financing activities.
13. What are the three sections of the statement of cash flows? Operating
activities, investing activities, and financing activities.
14. What is working capital? Current assets minus current liabilities; measures
a company's short-term liquidity.
15. What is the difference between current and non-current assets? Current
assets are expected to be converted to cash within one year, while non-current
assets are held for longer periods.
16. What is the difference between current and non-current liabilities?
Current liabilities are due within one year, while non-current liabilities are due
after one year.
17. What is depreciation? The systematic allocation of the cost of a long-term
asset over its useful life.
18. What is the difference between revenue and cash receipts? Revenue is
earned when goods are sold or services are provided, while cash receipts occur
when cash is actually received.
19. What is the accrual basis of accounting? Recording transactions when
they occur, regardless of when cash is exchanged.
20. What is the cash basis of accounting? Recording transactions only when
cash is received or paid.
Chapter 3: Cost Concepts
21. What is a cost? A cost is the monetary value of resources given up to
acquire goods or services.
22. What is the difference between direct and indirect costs? Direct costs
can be easily traced to a specific cost object, while indirect costs cannot be
easily traced and must be allocated.
, 23. What are variable costs? Costs that change in total in direct proportion to
changes in activity level.
24. What are fixed costs? Costs that remain constant in total regardless of
changes in activity level within the relevant range.
25. What are mixed costs? Costs that contain both fixed and variable
components.
26. What is the relevant range? The range of activity levels over which cost
behavior assumptions are valid.
27. What is a cost driver? A factor that causes or influences the incurrence of a
cost.
28. What is the difference between product costs and period costs? Product
costs are capitalized as inventory and expensed when sold, while period costs
are expensed in the period incurred.
29. What are the three components of product costs in manufacturing?
Direct materials, direct labor, and manufacturing overhead.
30. What is manufacturing overhead? All manufacturing costs except direct
materials and direct labor.
Chapter 4: Cost-Volume-Profit Analysis
31. What is cost-volume-profit (CVP) analysis? A method of analyzing the
relationship between costs, volume, and profits to make informed business
decisions.
32. What is the contribution margin? Sales revenue minus variable costs; the
amount available to cover fixed costs and provide profit.
33. What is the contribution margin ratio? Contribution margin divided by
sales revenue; shows the percentage of each sales dollar available to cover fixed
costs.
34. What is the break-even point? The level of sales at which total revenues
equal total costs, resulting in zero profit or loss.
35. How do you calculate the break-even point in units? Fixed Costs ÷
Contribution Margin per Unit
