WGU C213 Accounting for Decision Makers OA Exam Actual Exam 2026/2027 –
Comprehensive Test with Detailed Rationales | 100% Verified | Pass Guaranteed –
A+ Graded
Section 1: The Nature and Purpose of Accounting (10 Questions)
Q1: Which organization is primarily responsible for setting accounting standards in the
United States?
A. Securities and Exchange Commission (SEC)
B. Financial Accounting Standards Board (FASB)
C. Financial Accounting Standards Board (FASB) [CORRECT]
D. Internal Revenue Service (IRS)
Correct Answer: C
Rationale: The FASB is the independent, private-sector body that establishes and
improves Generally Accepted Accounting Principles (GAAP) in the United States; the
SEC regulates securities markets and has oversight authority but delegates
standard-setting to FASB; the IRS administers tax law and has no role in financial
accounting standards.
Q2: A company records land purchased 10 years ago at its original purchase price of
$150,000, even though the current market value is $400,000. Which accounting principle
justifies this treatment?
,A. Revenue recognition principle
B. Cost principle
C. Cost principle [CORRECT]
D. Materiality concept
Correct Answer: C
Rationale: The cost principle (historical cost principle) requires that assets be recorded
at their exchange price at the transaction date and not adjusted for subsequent
changes in market value; this ensures objectivity and verifiability in financial reporting,
though it may not reflect current economic reality—market value adjustments are only
permitted for specific assets under GAAP.
Q3: Which of the following best describes the difference between financial accounting
and managerial accounting?
A. Financial accounting is for internal users; managerial accounting is for external users
B. Financial accounting is for external users; managerial accounting is for internal users
C. Financial accounting is for external users; managerial accounting is for internal users
[CORRECT]
D. Both are exclusively for external regulatory compliance
Correct Answer: C
Rationale: Financial accounting provides quantitative financial information to external
users (investors, creditors, regulators) through standardized financial statements;
managerial accounting provides detailed, customized information to internal users
,(managers, executives) for planning, controlling, and decision-making—managerial
accounting is not bound by GAAP and focuses on relevance for internal decisions.
Q4: Under the accrual basis of accounting, when should revenue be recognized?
A. When cash is received from customers
B. When the work has been performed and collectability can be reasonably assured
C. When the work has been performed and collectability can be reasonably assured
[CORRECT]
D. When the invoice is mailed to the customer
Correct Answer: C
Rationale: Revenue recognition under accrual accounting requires that revenue be
recognized when it is earned (work performed, goods delivered) and realization is
reasonably assured (collectability probable); this is the core of accrual accounting,
which matches revenues to the period in which they are earned rather than when cash is
received—cash basis recognizes revenue only upon receipt of cash.
Q5: Which federal legislation was enacted in 2002 to increase federal scrutiny of
financial statement production following major accounting scandals?
A. The Securities Act of 1933
B. The Sarbanes-Oxley Act (SOX)
C. The Sarbanes-Oxley Act (SOX) [CORRECT]
D. The Dodd-Frank Act
, Correct Answer: C
Rationale: The Sarbanes-Oxley Act of 2002 was enacted in response to accounting
scandals (Enron, WorldCom) to enhance corporate governance, strengthen internal
controls, and increase accountability for financial reporting; it established the PCAOB to
oversee public company audits and requires CEO/CFO certification of financial
statements—this fundamentally changed corporate financial reporting.
Q6: Which organization has the authority to inspect audit practices of registered
accounting firms and impose sanctions, including barring firms from auditing
SEC-registered companies?
A. FASB
B. PCAOB
C. PCAOB [CORRECT]
D. AICPA
Correct Answer: C
Rationale: The Public Company Accounting Oversight Board (PCAOB) was created by
SOX to oversee the audits of public companies, inspect registered accounting firms'
audit practices, investigate questionable practices, and impose sanctions including
barring firms from auditing SEC-registered companies; FASB sets standards, and AICPA
is a professional membership organization without enforcement authority.
Q7: Which accounting concept requires that personal financial activities of business
owners be kept separate from the financial activities of the business?
Comprehensive Test with Detailed Rationales | 100% Verified | Pass Guaranteed –
A+ Graded
Section 1: The Nature and Purpose of Accounting (10 Questions)
Q1: Which organization is primarily responsible for setting accounting standards in the
United States?
A. Securities and Exchange Commission (SEC)
B. Financial Accounting Standards Board (FASB)
C. Financial Accounting Standards Board (FASB) [CORRECT]
D. Internal Revenue Service (IRS)
Correct Answer: C
Rationale: The FASB is the independent, private-sector body that establishes and
improves Generally Accepted Accounting Principles (GAAP) in the United States; the
SEC regulates securities markets and has oversight authority but delegates
standard-setting to FASB; the IRS administers tax law and has no role in financial
accounting standards.
Q2: A company records land purchased 10 years ago at its original purchase price of
$150,000, even though the current market value is $400,000. Which accounting principle
justifies this treatment?
,A. Revenue recognition principle
B. Cost principle
C. Cost principle [CORRECT]
D. Materiality concept
Correct Answer: C
Rationale: The cost principle (historical cost principle) requires that assets be recorded
at their exchange price at the transaction date and not adjusted for subsequent
changes in market value; this ensures objectivity and verifiability in financial reporting,
though it may not reflect current economic reality—market value adjustments are only
permitted for specific assets under GAAP.
Q3: Which of the following best describes the difference between financial accounting
and managerial accounting?
A. Financial accounting is for internal users; managerial accounting is for external users
B. Financial accounting is for external users; managerial accounting is for internal users
C. Financial accounting is for external users; managerial accounting is for internal users
[CORRECT]
D. Both are exclusively for external regulatory compliance
Correct Answer: C
Rationale: Financial accounting provides quantitative financial information to external
users (investors, creditors, regulators) through standardized financial statements;
managerial accounting provides detailed, customized information to internal users
,(managers, executives) for planning, controlling, and decision-making—managerial
accounting is not bound by GAAP and focuses on relevance for internal decisions.
Q4: Under the accrual basis of accounting, when should revenue be recognized?
A. When cash is received from customers
B. When the work has been performed and collectability can be reasonably assured
C. When the work has been performed and collectability can be reasonably assured
[CORRECT]
D. When the invoice is mailed to the customer
Correct Answer: C
Rationale: Revenue recognition under accrual accounting requires that revenue be
recognized when it is earned (work performed, goods delivered) and realization is
reasonably assured (collectability probable); this is the core of accrual accounting,
which matches revenues to the period in which they are earned rather than when cash is
received—cash basis recognizes revenue only upon receipt of cash.
Q5: Which federal legislation was enacted in 2002 to increase federal scrutiny of
financial statement production following major accounting scandals?
A. The Securities Act of 1933
B. The Sarbanes-Oxley Act (SOX)
C. The Sarbanes-Oxley Act (SOX) [CORRECT]
D. The Dodd-Frank Act
, Correct Answer: C
Rationale: The Sarbanes-Oxley Act of 2002 was enacted in response to accounting
scandals (Enron, WorldCom) to enhance corporate governance, strengthen internal
controls, and increase accountability for financial reporting; it established the PCAOB to
oversee public company audits and requires CEO/CFO certification of financial
statements—this fundamentally changed corporate financial reporting.
Q6: Which organization has the authority to inspect audit practices of registered
accounting firms and impose sanctions, including barring firms from auditing
SEC-registered companies?
A. FASB
B. PCAOB
C. PCAOB [CORRECT]
D. AICPA
Correct Answer: C
Rationale: The Public Company Accounting Oversight Board (PCAOB) was created by
SOX to oversee the audits of public companies, inspect registered accounting firms'
audit practices, investigate questionable practices, and impose sanctions including
barring firms from auditing SEC-registered companies; FASB sets standards, and AICPA
is a professional membership organization without enforcement authority.
Q7: Which accounting concept requires that personal financial activities of business
owners be kept separate from the financial activities of the business?
