WGU C213 – Accounting for Decision Makers (Western
Governors University) | Exam Questions and Answers
(2025/2026) | 100% Verified Original Copy
Section 1: Nature and Purpose of Accounting (10
Questions)
1. What is the primary purpose of accounting? Measure financial performance for
decision-making Rationale: Accounting quantifies business activities to assess
economic performance, aiding stakeholders like managers and investors.
2. Which financial statement tracks cash inflows and outflows? Statement of cash
flows Rationale: It categorizes cash flows into operating, investing, and financing
activities, showing liquidity.
3. Who is most concerned with a company’s ability to fund employee benefits?
Employees Rationale: Employees rely on financial stability for benefits like healthcare;
investors focus on returns.
4. What has most influenced modern accounting practices? Information
technology Rationale: IT enables automation, real-time reporting, and ERP systems,
enhancing efficiency and accuracy.
5. Which body oversees audits of public companies? Public Company Accounting
Oversight Board (PCAOB) Rationale: PCAOB, under Sarbanes-Oxley, ensures audit
quality for publicly traded firms.
6. How does financial accounting differ from managerial accounting? Financial:
external reporting; Managerial: internal planning Rationale: Financial accounting
uses GAAP for stakeholders; managerial accounting supports internal decisions.
, 7. What does the balance sheet represent? Assets, liabilities, and equity at a point
in time Rationale: It shows financial position via the equation Assets = Liabilities +
Equity.
8. What is the purpose of the income statement? Show revenues, expenses, and
net income Rationale: Measures profitability over a period, guiding performance
analysis.
9. What tracks changes in equity components? Statement of stockholders' equity
Rationale: Details changes from retained earnings, dividends, and stock transactions.
10. Why is the statement of cash flows important? Reveals cash sources and uses
Rationale: It reconciles net income to cash, critical for liquidity assessment.
Section 2: Financial Accounting Principles and
Financial Statements (15 Questions)
11. How are assets listed on the balance sheet? In order of liquidity Rationale:
Current assets (e.g., cash) precede long-term assets based on conversion to cash speed.
12. What is the accounting equation? Assets = Liabilities + Equity Rationale:
Foundation of double-entry accounting; transactions balance this equation.
13. What is accrual accounting? Records revenues/expenses when
earned/incurred Rationale: Matches economic events to periods, not cash flow timing.
14. What is the matching principle? Expenses aligned with related revenues
Rationale: Ensures accurate profitability (e.g., COGS matched to sales).
Governors University) | Exam Questions and Answers
(2025/2026) | 100% Verified Original Copy
Section 1: Nature and Purpose of Accounting (10
Questions)
1. What is the primary purpose of accounting? Measure financial performance for
decision-making Rationale: Accounting quantifies business activities to assess
economic performance, aiding stakeholders like managers and investors.
2. Which financial statement tracks cash inflows and outflows? Statement of cash
flows Rationale: It categorizes cash flows into operating, investing, and financing
activities, showing liquidity.
3. Who is most concerned with a company’s ability to fund employee benefits?
Employees Rationale: Employees rely on financial stability for benefits like healthcare;
investors focus on returns.
4. What has most influenced modern accounting practices? Information
technology Rationale: IT enables automation, real-time reporting, and ERP systems,
enhancing efficiency and accuracy.
5. Which body oversees audits of public companies? Public Company Accounting
Oversight Board (PCAOB) Rationale: PCAOB, under Sarbanes-Oxley, ensures audit
quality for publicly traded firms.
6. How does financial accounting differ from managerial accounting? Financial:
external reporting; Managerial: internal planning Rationale: Financial accounting
uses GAAP for stakeholders; managerial accounting supports internal decisions.
, 7. What does the balance sheet represent? Assets, liabilities, and equity at a point
in time Rationale: It shows financial position via the equation Assets = Liabilities +
Equity.
8. What is the purpose of the income statement? Show revenues, expenses, and
net income Rationale: Measures profitability over a period, guiding performance
analysis.
9. What tracks changes in equity components? Statement of stockholders' equity
Rationale: Details changes from retained earnings, dividends, and stock transactions.
10. Why is the statement of cash flows important? Reveals cash sources and uses
Rationale: It reconciles net income to cash, critical for liquidity assessment.
Section 2: Financial Accounting Principles and
Financial Statements (15 Questions)
11. How are assets listed on the balance sheet? In order of liquidity Rationale:
Current assets (e.g., cash) precede long-term assets based on conversion to cash speed.
12. What is the accounting equation? Assets = Liabilities + Equity Rationale:
Foundation of double-entry accounting; transactions balance this equation.
13. What is accrual accounting? Records revenues/expenses when
earned/incurred Rationale: Matches economic events to periods, not cash flow timing.
14. What is the matching principle? Expenses aligned with related revenues
Rationale: Ensures accurate profitability (e.g., COGS matched to sales).
