WGU C213 ACCOUNTING FOR
DECISION MAKERS PREP QUESTIONS
AND ANSWERS
1. Which financial statement provides a snapshot of a company’s financial position at a
specific point in time?
A. Income Statement
B. Balance Sheet
C. Statement of Cash Flows
D. Statement of Retained Earnings
Answer: B
Conceptual Explanation: The Balance Sheet reports assets, liabilities, and equity at a
specific date, whereas the other statements cover a period of time.
2. Under the accrual basis of accounting, when is revenue recognized?
A. When cash is received from the customer
B. When the performance obligation is satisfied
C. At the end of the fiscal year
,D. When the invoice is sent to the customer
Answer: B
Conceptual Explanation: Accrual accounting recognizes revenue when it is earned
(performance obligation satisfied), regardless of when cash is exchanged.
3. Which of the following describes the ‘Matching Principle’ in accounting?
A. Matching the total assets to total liabilities
B. Matching cash inflows with cash outflows
C. Ensuring debits match credits in every transaction
D. Recording expenses in the same period as the revenues they helped generate
Answer: D
Conceptual Explanation: The matching principle dictates that efforts (expenses) be
matched with accomplishments (revenues).
4. What is the impact on the accounting equation when a company purchases equipment
using cash?
A. Total assets increase
B. Total assets remain unchanged
C. Total liabilities increase
D. Equity decreases
, Answer: B
Conceptual Explanation: This is an asset exchange; one asset (Equipment) increases
while another asset (Cash) decreases by the same amount.
5. Which cost flow assumption results in the lowest net income during a period of rising
prices (inflation)?
A. LIFO (Last-In, First-Out)
B. Specific Identification
C. Weighted Average Cost
D. FIFO (First-In, First-Out)
Answer: A
Conceptual Explanation: LIFO assigns the most recent (higher) costs to Cost of Goods
Sold, resulting in lower net income during inflation.
6. A company has a Current Ratio of 2.5. What does this indicate?
A. The company has $2.50 in current assets for every $1 of current liabilities
B. The company has $2.50 in long-term assets for every $1 of debt
C. The company’s net income is 2.5 times its interest expense
D. The company’s stock price is 2.5 times its book value
Answer: A
DECISION MAKERS PREP QUESTIONS
AND ANSWERS
1. Which financial statement provides a snapshot of a company’s financial position at a
specific point in time?
A. Income Statement
B. Balance Sheet
C. Statement of Cash Flows
D. Statement of Retained Earnings
Answer: B
Conceptual Explanation: The Balance Sheet reports assets, liabilities, and equity at a
specific date, whereas the other statements cover a period of time.
2. Under the accrual basis of accounting, when is revenue recognized?
A. When cash is received from the customer
B. When the performance obligation is satisfied
C. At the end of the fiscal year
,D. When the invoice is sent to the customer
Answer: B
Conceptual Explanation: Accrual accounting recognizes revenue when it is earned
(performance obligation satisfied), regardless of when cash is exchanged.
3. Which of the following describes the ‘Matching Principle’ in accounting?
A. Matching the total assets to total liabilities
B. Matching cash inflows with cash outflows
C. Ensuring debits match credits in every transaction
D. Recording expenses in the same period as the revenues they helped generate
Answer: D
Conceptual Explanation: The matching principle dictates that efforts (expenses) be
matched with accomplishments (revenues).
4. What is the impact on the accounting equation when a company purchases equipment
using cash?
A. Total assets increase
B. Total assets remain unchanged
C. Total liabilities increase
D. Equity decreases
, Answer: B
Conceptual Explanation: This is an asset exchange; one asset (Equipment) increases
while another asset (Cash) decreases by the same amount.
5. Which cost flow assumption results in the lowest net income during a period of rising
prices (inflation)?
A. LIFO (Last-In, First-Out)
B. Specific Identification
C. Weighted Average Cost
D. FIFO (First-In, First-Out)
Answer: A
Conceptual Explanation: LIFO assigns the most recent (higher) costs to Cost of Goods
Sold, resulting in lower net income during inflation.
6. A company has a Current Ratio of 2.5. What does this indicate?
A. The company has $2.50 in current assets for every $1 of current liabilities
B. The company has $2.50 in long-term assets for every $1 of debt
C. The company’s net income is 2.5 times its interest expense
D. The company’s stock price is 2.5 times its book value
Answer: A
