WGU C213 ACCOUNTING FOR DECISION MAKERS EXAM
VERSION 2026/2027 | Questions and Verified Answers | A
Grade | Pass Guaranteed
Part I: Financial Accounting Foundations & the Accounting Cycle
(18 questions)
Q1: Maria starts a consulting business by investing $15,000 of her personal savings into
a business checking account. According to the accounting equation, which of the
following correctly describes the effect of this transaction?
A. Assets increase by $15,000; liabilities increase by $15,000
B. Assets increase by $15,000; equity increases by $15,000 [CORRECT]
C. Equity increases by $15,000; liabilities decrease by $15,000
D. Assets and equity both decrease by $15,000
Correct Answer: B
Rationale: When an owner invests cash in a business, the business's assets (Cash)
increase, and owner's equity (Common Stock or Owner's Capital) increases by the same
amount. The accounting equation (Assets = Liabilities + Equity) remains balanced. No
,liability is created because this is an investment, not a loan. Options A, C, and D
misapply the accounting equation or confuse investments with borrowing.
Q2: A company prepays $12,000 for a 12-month insurance policy on June 1. Under
accrual basis accounting, what adjusting entry is required on December 31 (7 months
later)?
A. Debit Insurance Expense $5,000; credit Prepaid Insurance $5,000
B. Debit Insurance Expense $7,000; credit Prepaid Insurance $7,000 [CORRECT]
C. Debit Prepaid Insurance $7,000; credit Insurance Expense $7,000
D. Debit Insurance Expense $12,000; credit Cash $12,000
Correct Answer: B
Rationale: After 7 months, $7,000 of insurance has expired ($12,000 ÷ 12 months × 7
months = $7,000) and must be recognized as expense. The adjusting entry debits
Insurance Expense (increasing expense) and credits Prepaid Insurance (decreasing the
asset). Option A calculates the remaining prepaid amount rather than expired amount.
Option C reverses the debit/credit. Option D incorrectly records the initial payment
rather than the adjustment.
,Q3: Which accounting principle requires that expenses be recognized in the same
period as the revenues they helped generate?
A. Historical cost principle
B. Revenue recognition principle
C. Matching principle [CORRECT]
D. Full disclosure principle
Correct Answer: C
Rationale: The matching principle (expense recognition principle) dictates that
expenses be recorded in the same accounting period as the revenues they contribute to
earning. This aligns with accrual accounting. Historical cost (A) requires recording
assets at purchase price. Revenue recognition (B) governs when revenue is recorded.
Full disclosure (D) requires reporting all relevant information.
Q4: A company performs $8,000 of services for a client in December but doesn't bill
until January. Under accrual accounting, what adjusting entry is needed on December
31?
A. Debit Cash $8,000; credit Service Revenue $8,000
B. Debit Accounts Receivable $8,000; credit Service Revenue $8,000 [CORRECT]
, C. Debit Unearned Revenue $8,000; credit Service Revenue $8,000
D. No entry is needed until cash is received
Correct Answer: B
Rationale: Under accrual accounting and the revenue recognition principle, revenue is
recognized when earned (services performed), not when cash is received. Since the
service was performed in December, revenue must be recorded then with a debit to
Accounts Receivable (asset) and credit to Service Revenue. Option A incorrectly
assumes cash was received. Option C applies to unearned revenue situations (cash
received before earning). Option D describes cash basis accounting, not accrual.
Q5: Which of the following is NOT one of the key assumptions underlying GAAP?
A. Economic entity assumption
B. Going concern assumption
C. Monetary unit assumption
D. Consistency assumption [CORRECT]
Correct Answer: D
VERSION 2026/2027 | Questions and Verified Answers | A
Grade | Pass Guaranteed
Part I: Financial Accounting Foundations & the Accounting Cycle
(18 questions)
Q1: Maria starts a consulting business by investing $15,000 of her personal savings into
a business checking account. According to the accounting equation, which of the
following correctly describes the effect of this transaction?
A. Assets increase by $15,000; liabilities increase by $15,000
B. Assets increase by $15,000; equity increases by $15,000 [CORRECT]
C. Equity increases by $15,000; liabilities decrease by $15,000
D. Assets and equity both decrease by $15,000
Correct Answer: B
Rationale: When an owner invests cash in a business, the business's assets (Cash)
increase, and owner's equity (Common Stock or Owner's Capital) increases by the same
amount. The accounting equation (Assets = Liabilities + Equity) remains balanced. No
,liability is created because this is an investment, not a loan. Options A, C, and D
misapply the accounting equation or confuse investments with borrowing.
Q2: A company prepays $12,000 for a 12-month insurance policy on June 1. Under
accrual basis accounting, what adjusting entry is required on December 31 (7 months
later)?
A. Debit Insurance Expense $5,000; credit Prepaid Insurance $5,000
B. Debit Insurance Expense $7,000; credit Prepaid Insurance $7,000 [CORRECT]
C. Debit Prepaid Insurance $7,000; credit Insurance Expense $7,000
D. Debit Insurance Expense $12,000; credit Cash $12,000
Correct Answer: B
Rationale: After 7 months, $7,000 of insurance has expired ($12,000 ÷ 12 months × 7
months = $7,000) and must be recognized as expense. The adjusting entry debits
Insurance Expense (increasing expense) and credits Prepaid Insurance (decreasing the
asset). Option A calculates the remaining prepaid amount rather than expired amount.
Option C reverses the debit/credit. Option D incorrectly records the initial payment
rather than the adjustment.
,Q3: Which accounting principle requires that expenses be recognized in the same
period as the revenues they helped generate?
A. Historical cost principle
B. Revenue recognition principle
C. Matching principle [CORRECT]
D. Full disclosure principle
Correct Answer: C
Rationale: The matching principle (expense recognition principle) dictates that
expenses be recorded in the same accounting period as the revenues they contribute to
earning. This aligns with accrual accounting. Historical cost (A) requires recording
assets at purchase price. Revenue recognition (B) governs when revenue is recorded.
Full disclosure (D) requires reporting all relevant information.
Q4: A company performs $8,000 of services for a client in December but doesn't bill
until January. Under accrual accounting, what adjusting entry is needed on December
31?
A. Debit Cash $8,000; credit Service Revenue $8,000
B. Debit Accounts Receivable $8,000; credit Service Revenue $8,000 [CORRECT]
, C. Debit Unearned Revenue $8,000; credit Service Revenue $8,000
D. No entry is needed until cash is received
Correct Answer: B
Rationale: Under accrual accounting and the revenue recognition principle, revenue is
recognized when earned (services performed), not when cash is received. Since the
service was performed in December, revenue must be recorded then with a debit to
Accounts Receivable (asset) and credit to Service Revenue. Option A incorrectly
assumes cash was received. Option C applies to unearned revenue situations (cash
received before earning). Option D describes cash basis accounting, not accrual.
Q5: Which of the following is NOT one of the key assumptions underlying GAAP?
A. Economic entity assumption
B. Going concern assumption
C. Monetary unit assumption
D. Consistency assumption [CORRECT]
Correct Answer: D
