WGU C213 Accounting for Decision Makers
Objective Assessment Exam Questions And Correct
Answers (Verified Answers) Plus Rationales 2027
Q&A | Instant Download Pdf
Section 1: Accounting Fundamentals & GAAP
Question 1: Which accounting concept assumes a business will continue operating
indefinitely?
A. Monetary unit assumption
B. Economic entity assumption
C. Going concern assumption
D. Periodicity assumption
Correct Answer: C
Rationale: The going concern assumption presumes the business will continue
operating long enough to carry out commitments and obligations. Periodicity
divides the business life into accounting periods, the entity assumption separates
owner from business, and the monetary unit assumes a stable currency.
Question 2: Under accrual accounting, revenue is recognized when:
A. Cash is received
B. The customer places an order
C. Earned, regardless of cash receipt
D. The invoice is printed
Correct Answer: C
,Rationale: The revenue recognition principle states that revenue should be
recognized when earned (delivery or service performed), not when cash changes
hands (which would be cash basis accounting).
Question 3: The matching principle requires:
A. Revenues equal expenses
B. Expenses matched to revenues in the same period
C. Cash outflows equal cash inflows
D. Assets = Liabilities + Equity
Correct Answer: B
Rationale: The matching principle requires that expenses be matched with the
revenues they help generate in the same accounting period (e.g., COGS matched
with sales). Option D is the accounting equation, not the matching principle.
Question 4: A company buys equipment for $50,000 cash. What is the effect on
the accounting equation?
A. Assets decrease, equity decreases
B. Assets increase, assets decrease (no net change)
C. Liabilities increase, assets increase
D. Equity increases, assets increase
Correct Answer: B
Rationale: One asset (equipment) increases by $50,000 while another asset (cash)
decreases by $50,000. Total assets remain unchanged, and there is no effect on
liabilities or equity.
Question 5: Which financial statement reports assets, liabilities, and equity at a
point in time?
,A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
Correct Answer: C
Rationale: The balance sheet provides a "snapshot" of a company's financial
position at a specific date. The income statement and statement of cash flows
cover a period of time.
Question 6: Retained earnings on the balance sheet represents:
A. Cash available for dividends
B. Cumulative net income not distributed as dividends
C. Total contributed capital
D. Market value of the company
Correct Answer: B
Rationale: Retained earnings = Beginning Retained Earnings + Net Income –
Dividends. It represents cumulative profits that have been reinvested in the
business, not cash available (which may be tied up in other assets).
Question 7: Which of the following is a liability?
A. Prepaid rent
B. Unearned revenue
C. Trademark
D. Accumulated depreciation
Correct Answer: B
Rationale: Unearned revenue represents an obligation to deliver goods or services
in the future. Prepaid rent is an asset, trademark is an intangible asset, and
accumulated depreciation is a contra-asset account.
, Question 8: The accounting equation is:
A. Assets = Liabilities – Equity
B. Assets + Liabilities = Equity
C. Assets = Liabilities + Equity
D. Assets + Equity = Liabilities
Correct Answer: C
Rationale: The fundamental accounting equation is Assets = Liabilities + Equity.
This must always balance and is the foundation of double-entry bookkeeping.
Question 9: Which is a contra-asset account?
A. Accounts receivable
B. Allowance for doubtful accounts
C. Sales returns
D. Accumulated amortization
Correct Answer: B
Rationale: Allowance for doubtful accounts reduces accounts receivable on the
balance sheet. Contra-asset accounts have a credit balance and are subtracted
from their related asset accounts.
Question 10: A company pays $12,000 for a 12-month insurance policy on
October 1. What is the prepaid insurance balance on December 31?
A. $12,000
B. $9,000
C. $3,000
D. $0
Correct Answer: B
Objective Assessment Exam Questions And Correct
Answers (Verified Answers) Plus Rationales 2027
Q&A | Instant Download Pdf
Section 1: Accounting Fundamentals & GAAP
Question 1: Which accounting concept assumes a business will continue operating
indefinitely?
A. Monetary unit assumption
B. Economic entity assumption
C. Going concern assumption
D. Periodicity assumption
Correct Answer: C
Rationale: The going concern assumption presumes the business will continue
operating long enough to carry out commitments and obligations. Periodicity
divides the business life into accounting periods, the entity assumption separates
owner from business, and the monetary unit assumes a stable currency.
Question 2: Under accrual accounting, revenue is recognized when:
A. Cash is received
B. The customer places an order
C. Earned, regardless of cash receipt
D. The invoice is printed
Correct Answer: C
,Rationale: The revenue recognition principle states that revenue should be
recognized when earned (delivery or service performed), not when cash changes
hands (which would be cash basis accounting).
Question 3: The matching principle requires:
A. Revenues equal expenses
B. Expenses matched to revenues in the same period
C. Cash outflows equal cash inflows
D. Assets = Liabilities + Equity
Correct Answer: B
Rationale: The matching principle requires that expenses be matched with the
revenues they help generate in the same accounting period (e.g., COGS matched
with sales). Option D is the accounting equation, not the matching principle.
Question 4: A company buys equipment for $50,000 cash. What is the effect on
the accounting equation?
A. Assets decrease, equity decreases
B. Assets increase, assets decrease (no net change)
C. Liabilities increase, assets increase
D. Equity increases, assets increase
Correct Answer: B
Rationale: One asset (equipment) increases by $50,000 while another asset (cash)
decreases by $50,000. Total assets remain unchanged, and there is no effect on
liabilities or equity.
Question 5: Which financial statement reports assets, liabilities, and equity at a
point in time?
,A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
Correct Answer: C
Rationale: The balance sheet provides a "snapshot" of a company's financial
position at a specific date. The income statement and statement of cash flows
cover a period of time.
Question 6: Retained earnings on the balance sheet represents:
A. Cash available for dividends
B. Cumulative net income not distributed as dividends
C. Total contributed capital
D. Market value of the company
Correct Answer: B
Rationale: Retained earnings = Beginning Retained Earnings + Net Income –
Dividends. It represents cumulative profits that have been reinvested in the
business, not cash available (which may be tied up in other assets).
Question 7: Which of the following is a liability?
A. Prepaid rent
B. Unearned revenue
C. Trademark
D. Accumulated depreciation
Correct Answer: B
Rationale: Unearned revenue represents an obligation to deliver goods or services
in the future. Prepaid rent is an asset, trademark is an intangible asset, and
accumulated depreciation is a contra-asset account.
, Question 8: The accounting equation is:
A. Assets = Liabilities – Equity
B. Assets + Liabilities = Equity
C. Assets = Liabilities + Equity
D. Assets + Equity = Liabilities
Correct Answer: C
Rationale: The fundamental accounting equation is Assets = Liabilities + Equity.
This must always balance and is the foundation of double-entry bookkeeping.
Question 9: Which is a contra-asset account?
A. Accounts receivable
B. Allowance for doubtful accounts
C. Sales returns
D. Accumulated amortization
Correct Answer: B
Rationale: Allowance for doubtful accounts reduces accounts receivable on the
balance sheet. Contra-asset accounts have a credit balance and are subtracted
from their related asset accounts.
Question 10: A company pays $12,000 for a 12-month insurance policy on
October 1. What is the prepaid insurance balance on December 31?
A. $12,000
B. $9,000
C. $3,000
D. $0
Correct Answer: B
