LATEST WGU C213 ACCOUNTING FOR DECISION MAKERS
EXAM / ACCOUNTING FOR DECISION MAKERS WGU C213
FINAL EXAM 2026/2027 TESTBANK AND STUDY GUIDE
COMPLETE ACCURATE EXAM REAL QUESTIONS AND
CORRECT DETAILED ANSWERS WITH RATIONALES (100%
CORRECT VERIFIED SOLUTIONS
1. What is the primary objective of financial accounting?
A) To provide information for internal decision-making
B) To record the day-to-day financial activities of a company
C) To provide financial information about a business to external users for decision-making
D) To ensure the company pays the correct amount of tax
Correct Answer: C
Rationale: Financial accounting's main goal is to create standardized financial statements (like
the balance sheet and income statement) that are useful for external stakeholders such as
investors, creditors, and regulators .
2. Which of the following best describes the accounting equation?
A) Assets = Liabilities + Owner's Equity
B) Assets = Liabilities - Owner's Equity
C) Revenues = Expenses + Net Income
D) Liabilities = Assets + Owner's Equity
Correct Answer: A
Rationale: The accounting equation (Assets = Liabilities + Equity) is the foundation of the
double-entry bookkeeping system. It shows that a company's resources (assets) are financed by
either debt (liabilities) or owner's investments (equity) .
**3. A company purchases equipment for $10,000 in cash. How does this transaction affect the
accounting equation?**
A) Assets increase by $10,000; liabilities increase by $10,000
B) Assets decrease by $10,000; liabilities decrease by $10,000
C) Assets remain unchanged; liabilities increase by $10,000
D) Assets remain unchanged; equity increases by $10,000
,Correct Answer: C
Rationale: The purchase of equipment for cash is an exchange of one asset for another. Cash (an
asset) decreases by $10,000, and Equipment (an asset) increases by $10,000. The total assets
remain unchanged, and there is no impact on liabilities or equity.
4. Which financial statement reports a company's financial position at a specific point in time?
A) Income Statement
B) Statement of Cash Flows
C) Balance Sheet
D) Statement of Stockholders' Equity
Correct Answer: C
Rationale: The balance sheet is a "snapshot" of a company's financial health on a specific date,
showing its assets, liabilities, and shareholders' equity .
5. The income statement reports a company's financial performance over a period of time by
showing:
A) Assets, liabilities, and equity
B) Revenues and expenses
C) Cash inflows and outflows
D) Changes in retained earnings
Correct Answer: B
Rationale: The income statement measures a company's profitability over a specific period by
showing the total revenues earned and expenses incurred to generate that revenue. The result
is net income or net loss .
6. Under the accrual basis of accounting, revenues are recognized when:
A) The cash is received from the customer
B) The earnings process is complete and collectibility is reasonably assured
C) The invoice is sent to the customer
D) The customer places an order
Correct Answer: B
Rationale: This is the core principle of accrual accounting, which is required under GAAP.
Revenue is recognized when it is "earned," meaning the service has been provided or the goods
have been delivered, regardless of when cash changes hands .
,7. Which of the following is a key difference between bookkeeping and accounting?
A) Bookkeeping involves recording transactions, while accounting involves analyzing and
interpreting the data
B) Bookkeeping is more complex than accounting
C) There is no difference; the terms are interchangeable
D) Bookkeeping is for internal use, and accounting is for external use
Correct Answer: A
Rationale: Bookkeeping is the process of systematically recording financial transactions.
Accounting builds on this to analyze, interpret, and communicate the financial information to
support decision-making .
8. What is the normal balance of a liability account?
A) Debit
B) Credit
C) It depends on the type of liability
D) It is always zero
Correct Answer: B
Rationale: Liability accounts have a normal "credit" balance. A credit to a liability account
increases its balance, while a debit decreases it. The accounting equation helps remember this:
Liabilities are on the right side (credit) of the equation .
9. A company performed services for a customer on account. How would this transaction be
recorded?
A) Debit Cash, Credit Revenue
B) Debit Accounts Receivable, Credit Revenue
C) Debit Revenue, Credit Accounts Receivable
D) Debit Cash, Credit Accounts Payable
Correct Answer: B
Rationale: "On account" means the customer will pay later. The company has earned revenue
(Credit) and has a right to receive cash in the future, which is an asset called Accounts
Receivable (Debit).
, 10. What is the purpose of the Statement of Cash Flows?
A) To show the company's net income
B) To show the company's financial position at a point in time
C) To provide information about the cash receipts and cash payments of a company
D) To show changes in owners' equity
Correct Answer: C
Rationale: The Statement of Cash Flows reports a company's cash inflows and outflows during a
period, categorized into operating, investing, and financing activities. It is crucial for assessing
liquidity and solvency .
11. The financial statement that details the changes in a company's retained earnings over a
period is the:
A) Balance Sheet
B) Income Statement
C) Statement of Stockholders' Equity
D) Statement of Cash Flows
Correct Answer: C
Rationale: The Statement of Stockholders' Equity (or Statement of Retained Earnings) shows the
changes in the equity accounts, including net income from the income statement, dividends
paid, and any new stock issuances .
12. Which of the following is considered a long-term asset?
A) Cash
B) Accounts Receivable
C) Prepaid Rent
D) Buildings
Correct Answer: D
Rationale: Buildings are a long-term (non-current) asset because they are expected to provide
economic benefit for more than one year. Cash, accounts receivable, and prepaid rent are
considered current assets .
13. An unadjusted trial balance is prepared to:
A) Ensure all expenses have been recorded
B) Test the equality of debits and credits after posting journal entries
EXAM / ACCOUNTING FOR DECISION MAKERS WGU C213
FINAL EXAM 2026/2027 TESTBANK AND STUDY GUIDE
COMPLETE ACCURATE EXAM REAL QUESTIONS AND
CORRECT DETAILED ANSWERS WITH RATIONALES (100%
CORRECT VERIFIED SOLUTIONS
1. What is the primary objective of financial accounting?
A) To provide information for internal decision-making
B) To record the day-to-day financial activities of a company
C) To provide financial information about a business to external users for decision-making
D) To ensure the company pays the correct amount of tax
Correct Answer: C
Rationale: Financial accounting's main goal is to create standardized financial statements (like
the balance sheet and income statement) that are useful for external stakeholders such as
investors, creditors, and regulators .
2. Which of the following best describes the accounting equation?
A) Assets = Liabilities + Owner's Equity
B) Assets = Liabilities - Owner's Equity
C) Revenues = Expenses + Net Income
D) Liabilities = Assets + Owner's Equity
Correct Answer: A
Rationale: The accounting equation (Assets = Liabilities + Equity) is the foundation of the
double-entry bookkeeping system. It shows that a company's resources (assets) are financed by
either debt (liabilities) or owner's investments (equity) .
**3. A company purchases equipment for $10,000 in cash. How does this transaction affect the
accounting equation?**
A) Assets increase by $10,000; liabilities increase by $10,000
B) Assets decrease by $10,000; liabilities decrease by $10,000
C) Assets remain unchanged; liabilities increase by $10,000
D) Assets remain unchanged; equity increases by $10,000
,Correct Answer: C
Rationale: The purchase of equipment for cash is an exchange of one asset for another. Cash (an
asset) decreases by $10,000, and Equipment (an asset) increases by $10,000. The total assets
remain unchanged, and there is no impact on liabilities or equity.
4. Which financial statement reports a company's financial position at a specific point in time?
A) Income Statement
B) Statement of Cash Flows
C) Balance Sheet
D) Statement of Stockholders' Equity
Correct Answer: C
Rationale: The balance sheet is a "snapshot" of a company's financial health on a specific date,
showing its assets, liabilities, and shareholders' equity .
5. The income statement reports a company's financial performance over a period of time by
showing:
A) Assets, liabilities, and equity
B) Revenues and expenses
C) Cash inflows and outflows
D) Changes in retained earnings
Correct Answer: B
Rationale: The income statement measures a company's profitability over a specific period by
showing the total revenues earned and expenses incurred to generate that revenue. The result
is net income or net loss .
6. Under the accrual basis of accounting, revenues are recognized when:
A) The cash is received from the customer
B) The earnings process is complete and collectibility is reasonably assured
C) The invoice is sent to the customer
D) The customer places an order
Correct Answer: B
Rationale: This is the core principle of accrual accounting, which is required under GAAP.
Revenue is recognized when it is "earned," meaning the service has been provided or the goods
have been delivered, regardless of when cash changes hands .
,7. Which of the following is a key difference between bookkeeping and accounting?
A) Bookkeeping involves recording transactions, while accounting involves analyzing and
interpreting the data
B) Bookkeeping is more complex than accounting
C) There is no difference; the terms are interchangeable
D) Bookkeeping is for internal use, and accounting is for external use
Correct Answer: A
Rationale: Bookkeeping is the process of systematically recording financial transactions.
Accounting builds on this to analyze, interpret, and communicate the financial information to
support decision-making .
8. What is the normal balance of a liability account?
A) Debit
B) Credit
C) It depends on the type of liability
D) It is always zero
Correct Answer: B
Rationale: Liability accounts have a normal "credit" balance. A credit to a liability account
increases its balance, while a debit decreases it. The accounting equation helps remember this:
Liabilities are on the right side (credit) of the equation .
9. A company performed services for a customer on account. How would this transaction be
recorded?
A) Debit Cash, Credit Revenue
B) Debit Accounts Receivable, Credit Revenue
C) Debit Revenue, Credit Accounts Receivable
D) Debit Cash, Credit Accounts Payable
Correct Answer: B
Rationale: "On account" means the customer will pay later. The company has earned revenue
(Credit) and has a right to receive cash in the future, which is an asset called Accounts
Receivable (Debit).
, 10. What is the purpose of the Statement of Cash Flows?
A) To show the company's net income
B) To show the company's financial position at a point in time
C) To provide information about the cash receipts and cash payments of a company
D) To show changes in owners' equity
Correct Answer: C
Rationale: The Statement of Cash Flows reports a company's cash inflows and outflows during a
period, categorized into operating, investing, and financing activities. It is crucial for assessing
liquidity and solvency .
11. The financial statement that details the changes in a company's retained earnings over a
period is the:
A) Balance Sheet
B) Income Statement
C) Statement of Stockholders' Equity
D) Statement of Cash Flows
Correct Answer: C
Rationale: The Statement of Stockholders' Equity (or Statement of Retained Earnings) shows the
changes in the equity accounts, including net income from the income statement, dividends
paid, and any new stock issuances .
12. Which of the following is considered a long-term asset?
A) Cash
B) Accounts Receivable
C) Prepaid Rent
D) Buildings
Correct Answer: D
Rationale: Buildings are a long-term (non-current) asset because they are expected to provide
economic benefit for more than one year. Cash, accounts receivable, and prepaid rent are
considered current assets .
13. An unadjusted trial balance is prepared to:
A) Ensure all expenses have been recorded
B) Test the equality of debits and credits after posting journal entries
