ACCOUNTING FOR DECISION MAKERS
(C213) STUDY GUIDE SOLUTIONS WITH
ANSWERS 2025-2026 Western Governors
University
, C213 Study Guide Solutions
Table of Contents
Chapter 1: Nature and Purpose of Accounting ....................................................................... 1
Describe the purpose of accounting .................................................................................. 1
Describe the three financial statements. ........................................................................... 1
Identify users of financial statements for a particular situation ...................................... 1
Identify U.S. accounting rules and their origins. .............................................................. 2
Differentiate the roles of important accreditation organizations. ................................... 3
Describe current trends that are causing changes in the field of accounting .............. 3
Chapter 2: Overview of Financial Statements......................................................................... 3
Identify the purposes of financial statements in specific situations............................... 3
Identify components of a balance sheet ........................................................................... 4
Use the accounting equation to calculate total assets, total liabilities, or total
stockholders’ equity.............................................................................................................. 5
Identify components of the income statement.................................................................. 5
Identify components of the cash flow statement .............................................................. 6
Explain the purpose of notes to financial statements...................................................... 6
Describe the purpose of an external audit ........................................................................ 7
Explain the concepts of comparability, conservatism, materiality, and articulation .... 7
Chapter 3: Introduction to Financial Statement Analysis ...................................................... 8
Recognize the purpose of financial statement analysis and financial ratios. .............. 8
Compute widely used financial ratios. ............................................................................... 8
Interpret widely used financial ratios. ................................................................................ 8
Calculate cash flow ratios for a given situation ................................................................ 8
Chapter 4: The Balance Sheet ................................................................................................ 12
Identify the order of assets, liabilities, and stockholders’ equity accounts on a
balance sheet ...................................................................................................................... 12
Record the proper values for items on a balance sheet in a particular situation ...... 14
Chapter 5: The Income Statement.......................................................................................... 15
Describe the purpose of net income on an income statement .................................... 15
Prepare a simplified income statement ........................................................................... 15
Explain when revenues and expenses are recognized for a particular situation ...... 15
Analyze the impact of revenue transactions on the expanded accounting equation
and financial statements. ................................................................................................... 16
, Evaluate a historical income statement to forecast a future income statement ........ 16
Chapter 6: The Statement of Cash Flows ............................................................................. 17
Describe the purpose of the statement of cash flows. .................................................. 17
Identify the categories of a cash flow statement and cash flow activities included in
each category. ..................................................................................................................... 17
Prepare a simplified statement of cash flows. ................................................................ 18
Describe the differences between the direct and indirect methods of the cash flow
statement ............................................................................................................................. 19
Analyze a statement of cash flows to identify operating, investing, or financing
activities. .............................................................................................................................. 19
Chapter 7: Cash Budgeting...................................................................................................... 20
Evaluate a company’s credit policy.................................................................................. 20
Calculate cash collections from cash and credit sales based upon collection history.
............................................................................................................................................... 20
Calculate cash payments for disbursement based upon a company’s payment
policy. ................................................................................................................................... 21
Chapter 8: Internal Controls ..................................................................................................... 22
Identify common financial statement errors.................................................................... 22
Recommend the proper internal controls to prevent accidental loss or intentional
theft or fraud for a particular situation.............................................................................. 22
Identify motivations and common techniques used to manage earnings. ................. 22
Explain the effect of the Sarbanes-Oxley Act on financial reporting........................... 23
Describe the role of auditors and their impact on the integrity of financial
statements. .......................................................................................................................... 24
Explain the role of the U.S. Securities and Exchange Commission (SEC) in
financial reporting ............................................................................................................... 24
Chapter 9: Managerial Accounting and Cost Concepts ...................................................... 25
Describe the purpose of management accounting ........................................................ 25
Differentiate between management and financial accounting ..................................... 25
Describe the differences between accounting in a manufacturing environment and
a service environment ........................................................................................................ 25
Define common terms and concepts used in management accounting .................... 26
Distinguish between product costs and period costs. ................................................... 28
Describe the role of key ethical standards in the field of management accounting. 28
Calculate the cost of a product ......................................................................................... 28
Differentiate how the types of inventory affect calculations. ........................................ 28
Explain the difference between job costing and product costing ................................ 28
, Chapter 10: Activity-Based-Costing (ABC)............................................................................ 29
Compare and contrast traditional costing to activity-based costing (ABC). ............... 29
Identify categories of ABC activities and their related overhead costs. ..................... 29
Identify appropriate cost drivers for a particular situation ............................................. 30
Compute overhead costs under an ABC system. ......................................................... 31
Compute product costs under a traditional volume-based costing system. .............. 32
Justify a decision about a selling price based on traditional volume-based costing or
activity-based costing systems. ........................................................................................ 32
Chapter 11: Cost-Volume-Profit Analysis (C-V-P)................................................................ 33
Describe cost-volume-profit analysis. .............................................................................. 33
Describe how basic cost behavior patterns change as sales volumes change ........ 33
Apply cost-volume-profit analysis to demonstrate the effect of changes in variable
costs, fixed costs, sales price, and sales volume on profit .......................................... 33
Analyze a cost-volume-profit graph to determine the level of variable costs, fixed
costs, break-even point, and profit .................................................................................. 35
(C213) STUDY GUIDE SOLUTIONS WITH
ANSWERS 2025-2026 Western Governors
University
, C213 Study Guide Solutions
Table of Contents
Chapter 1: Nature and Purpose of Accounting ....................................................................... 1
Describe the purpose of accounting .................................................................................. 1
Describe the three financial statements. ........................................................................... 1
Identify users of financial statements for a particular situation ...................................... 1
Identify U.S. accounting rules and their origins. .............................................................. 2
Differentiate the roles of important accreditation organizations. ................................... 3
Describe current trends that are causing changes in the field of accounting .............. 3
Chapter 2: Overview of Financial Statements......................................................................... 3
Identify the purposes of financial statements in specific situations............................... 3
Identify components of a balance sheet ........................................................................... 4
Use the accounting equation to calculate total assets, total liabilities, or total
stockholders’ equity.............................................................................................................. 5
Identify components of the income statement.................................................................. 5
Identify components of the cash flow statement .............................................................. 6
Explain the purpose of notes to financial statements...................................................... 6
Describe the purpose of an external audit ........................................................................ 7
Explain the concepts of comparability, conservatism, materiality, and articulation .... 7
Chapter 3: Introduction to Financial Statement Analysis ...................................................... 8
Recognize the purpose of financial statement analysis and financial ratios. .............. 8
Compute widely used financial ratios. ............................................................................... 8
Interpret widely used financial ratios. ................................................................................ 8
Calculate cash flow ratios for a given situation ................................................................ 8
Chapter 4: The Balance Sheet ................................................................................................ 12
Identify the order of assets, liabilities, and stockholders’ equity accounts on a
balance sheet ...................................................................................................................... 12
Record the proper values for items on a balance sheet in a particular situation ...... 14
Chapter 5: The Income Statement.......................................................................................... 15
Describe the purpose of net income on an income statement .................................... 15
Prepare a simplified income statement ........................................................................... 15
Explain when revenues and expenses are recognized for a particular situation ...... 15
Analyze the impact of revenue transactions on the expanded accounting equation
and financial statements. ................................................................................................... 16
, Evaluate a historical income statement to forecast a future income statement ........ 16
Chapter 6: The Statement of Cash Flows ............................................................................. 17
Describe the purpose of the statement of cash flows. .................................................. 17
Identify the categories of a cash flow statement and cash flow activities included in
each category. ..................................................................................................................... 17
Prepare a simplified statement of cash flows. ................................................................ 18
Describe the differences between the direct and indirect methods of the cash flow
statement ............................................................................................................................. 19
Analyze a statement of cash flows to identify operating, investing, or financing
activities. .............................................................................................................................. 19
Chapter 7: Cash Budgeting...................................................................................................... 20
Evaluate a company’s credit policy.................................................................................. 20
Calculate cash collections from cash and credit sales based upon collection history.
............................................................................................................................................... 20
Calculate cash payments for disbursement based upon a company’s payment
policy. ................................................................................................................................... 21
Chapter 8: Internal Controls ..................................................................................................... 22
Identify common financial statement errors.................................................................... 22
Recommend the proper internal controls to prevent accidental loss or intentional
theft or fraud for a particular situation.............................................................................. 22
Identify motivations and common techniques used to manage earnings. ................. 22
Explain the effect of the Sarbanes-Oxley Act on financial reporting........................... 23
Describe the role of auditors and their impact on the integrity of financial
statements. .......................................................................................................................... 24
Explain the role of the U.S. Securities and Exchange Commission (SEC) in
financial reporting ............................................................................................................... 24
Chapter 9: Managerial Accounting and Cost Concepts ...................................................... 25
Describe the purpose of management accounting ........................................................ 25
Differentiate between management and financial accounting ..................................... 25
Describe the differences between accounting in a manufacturing environment and
a service environment ........................................................................................................ 25
Define common terms and concepts used in management accounting .................... 26
Distinguish between product costs and period costs. ................................................... 28
Describe the role of key ethical standards in the field of management accounting. 28
Calculate the cost of a product ......................................................................................... 28
Differentiate how the types of inventory affect calculations. ........................................ 28
Explain the difference between job costing and product costing ................................ 28
, Chapter 10: Activity-Based-Costing (ABC)............................................................................ 29
Compare and contrast traditional costing to activity-based costing (ABC). ............... 29
Identify categories of ABC activities and their related overhead costs. ..................... 29
Identify appropriate cost drivers for a particular situation ............................................. 30
Compute overhead costs under an ABC system. ......................................................... 31
Compute product costs under a traditional volume-based costing system. .............. 32
Justify a decision about a selling price based on traditional volume-based costing or
activity-based costing systems. ........................................................................................ 32
Chapter 11: Cost-Volume-Profit Analysis (C-V-P)................................................................ 33
Describe cost-volume-profit analysis. .............................................................................. 33
Describe how basic cost behavior patterns change as sales volumes change ........ 33
Apply cost-volume-profit analysis to demonstrate the effect of changes in variable
costs, fixed costs, sales price, and sales volume on profit .......................................... 33
Analyze a cost-volume-profit graph to determine the level of variable costs, fixed
costs, break-even point, and profit .................................................................................. 35
