WGU C213 ACCOUNTING FOR DECISION MAKERS OA EXAM BANK |
ACCURATE AND CURRENTLY TESTING REAL EXAM QUESTIONS AND
ANSWERS WITH RATIONALES | EXPERT VERIFIED FOR GUARANTEED
PASS
Question 1
What is the primary definition of accounting?
A) The preservation of a quantitative record of an activity.
B) The recording of day-to-day financial activities and organizing that information into summary
reports.
C) The process of calculating a company's tax liability.
D) The evaluation of a company's stock price.
E) The handling of routine bookkeeping tasks.
Correct Answer: B) The recording of day-to-day financial activities and organizing that
information into summary reports.
Rationale: Accounting is a comprehensive process that includes not only the recording of
financial activities (bookkeeping) but also the crucial step of organizing, summarizing, and
reporting that information in the form of financial statements to be used for evaluation and
decision-making.
Question 2
Which of the following is the best description of bookkeeping?
A) The creation of summary reports to evaluate a company's financial status.
B) The process of making decisions about the future based on financial data.
C) The preservation of a systematic, quantitative record of an activity.
D) The analysis of a company's stock performance.
E) The establishment of accounting rules.
Correct Answer: C) The preservation of a systematic, quantitative record of an activity.
Rationale: Bookkeeping is the foundational, mechanical part of accounting. Its primary
function is to accurately and systematically record the quantitative details of a company's
financial transactions.
,[Type here]
Question 3
What are the three primary financial statements used to evaluate a company's performance and
financial status?
A) The Balance Sheet, the Income Statement, and the Statement of Cash Flows.
B) The Annual Report, the Tax Return, and the Budget.
C) The Balance Sheet, the General Ledger, and the Trial Balance.
D) The Income Statement, the Statement of Retained Earnings, and the Audit Report.
E) The Cash Flow Forecast, the Pro Forma Income Statement, and the Balance Sheet.
Correct Answer: A) The Balance Sheet, the Income Statement, and the Statement of Cash
Flows.
Rationale: These three statements are the core outputs of the financial accounting system,
each providing a different and essential view of a company's financial health and
performance.
Question 4
Financial accounting information is primarily prepared for and used by which group?
A) Internal users, such as managers.
B) The Internal Revenue Service (IRS).
C) External users, such as investors and creditors.
D) The company's marketing department.
E) The company's human resources department.
Correct Answer: C) External users, such as investors and creditors.
Rationale: Financial accounting is focused on providing standardized, objective
information to parties outside the organization. These external users need reliable data to
make informed decisions about investing in, lending to, or doing business with the
company.
Question 5
Which financial statement reports a company's assets, liabilities, and owners' equity at a specific
point in time?
A) The Income Statement
B) The Statement of Cash Flows
,[Type here]
C) The Statement of Retained Earnings
D) The Balance Sheet
E) The Annual Report
Correct Answer: D) The Balance Sheet
Rationale: The Balance Sheet is a snapshot of the company's financial position. It shows
what the company owns (assets), what it owes (liabilities), and the net worth of the owners
(owners' equity) on a single, specific day.
Question 6
Which financial statement reports the excess of a company's revenues over its expenses for a
period of time?
A) The Balance Sheet
B) The Income Statement
C) The Statement of Cash Flows
D) The Statement of Owners' Equity
E) The General Ledger
Correct Answer: B) The Income Statement
Rationale: The Income Statement, also known as the Profit and Loss (P&L) statement,
summarizes a company's financial performance over a period (e.g., a month, quarter, or
year) by subtracting expenses from revenues to arrive at net income.
Question 7
Which private body is responsible for establishing generally accepted accounting principles
(GAAP) in the United States?
A) The Securities and Exchange Commission (SEC)
B) The International Accounting Standards Board (IASB)
C) The Internal Revenue Service (IRS)
D) The American Institute of Certified Public Accountants (AICPA)
E) The Financial Accounting Standards Board (FASB)
Correct Answer: E) The Financial Accounting Standards Board (FASB)
Rationale: The FASB is the designated private-sector organization in the U.S. that has the
, [Type here]
primary responsibility for establishing accounting and financial reporting standards for
non-governmental entities.
Question 8
Which U.S. government agency has the legal authority to regulate U.S. stock exchanges and to
oversee the production of financial statements by publicly traded companies?
A) The Internal Revenue Service (IRS)
B) The Financial Accounting Standards Board (FASB)
C) The Public Company Accounting Oversight Board (PCAOB)
D) The Securities and Exchange Commission (SEC)
E) The International Accounting Standards Board (IASB)
Correct Answer: D) The Securities and Exchange Commission (SEC)
Rationale: The SEC is an independent agency of the U.S. federal government whose
primary mission is to protect investors and maintain fair, orderly, and efficient markets.
While it delegates much of the rule-making to the FASB, it retains the ultimate legal
authority over financial reporting for public companies.
Question 9
What is the fundamental accounting equation?
A) Assets = Liabilities - Owners' Equity
B) Assets + Liabilities = Owners' Equity
C) Assets = Liabilities + Owners' Equity
D) Revenues - Expenses = Assets
E) Assets + Owners' Equity = Liabilities
Correct Answer: C) Assets = Liabilities + Owners' Equity
Rationale: This equation is the foundation of double-entry bookkeeping and the balance
sheet. It states that a company's resources (assets) are financed by either debt (liabilities) or
the investment of the owners (owners' equity).
Question 10
In what order are assets typically listed on a U.S. balance sheet?
A) In alphabetical order.
ACCURATE AND CURRENTLY TESTING REAL EXAM QUESTIONS AND
ANSWERS WITH RATIONALES | EXPERT VERIFIED FOR GUARANTEED
PASS
Question 1
What is the primary definition of accounting?
A) The preservation of a quantitative record of an activity.
B) The recording of day-to-day financial activities and organizing that information into summary
reports.
C) The process of calculating a company's tax liability.
D) The evaluation of a company's stock price.
E) The handling of routine bookkeeping tasks.
Correct Answer: B) The recording of day-to-day financial activities and organizing that
information into summary reports.
Rationale: Accounting is a comprehensive process that includes not only the recording of
financial activities (bookkeeping) but also the crucial step of organizing, summarizing, and
reporting that information in the form of financial statements to be used for evaluation and
decision-making.
Question 2
Which of the following is the best description of bookkeeping?
A) The creation of summary reports to evaluate a company's financial status.
B) The process of making decisions about the future based on financial data.
C) The preservation of a systematic, quantitative record of an activity.
D) The analysis of a company's stock performance.
E) The establishment of accounting rules.
Correct Answer: C) The preservation of a systematic, quantitative record of an activity.
Rationale: Bookkeeping is the foundational, mechanical part of accounting. Its primary
function is to accurately and systematically record the quantitative details of a company's
financial transactions.
,[Type here]
Question 3
What are the three primary financial statements used to evaluate a company's performance and
financial status?
A) The Balance Sheet, the Income Statement, and the Statement of Cash Flows.
B) The Annual Report, the Tax Return, and the Budget.
C) The Balance Sheet, the General Ledger, and the Trial Balance.
D) The Income Statement, the Statement of Retained Earnings, and the Audit Report.
E) The Cash Flow Forecast, the Pro Forma Income Statement, and the Balance Sheet.
Correct Answer: A) The Balance Sheet, the Income Statement, and the Statement of Cash
Flows.
Rationale: These three statements are the core outputs of the financial accounting system,
each providing a different and essential view of a company's financial health and
performance.
Question 4
Financial accounting information is primarily prepared for and used by which group?
A) Internal users, such as managers.
B) The Internal Revenue Service (IRS).
C) External users, such as investors and creditors.
D) The company's marketing department.
E) The company's human resources department.
Correct Answer: C) External users, such as investors and creditors.
Rationale: Financial accounting is focused on providing standardized, objective
information to parties outside the organization. These external users need reliable data to
make informed decisions about investing in, lending to, or doing business with the
company.
Question 5
Which financial statement reports a company's assets, liabilities, and owners' equity at a specific
point in time?
A) The Income Statement
B) The Statement of Cash Flows
,[Type here]
C) The Statement of Retained Earnings
D) The Balance Sheet
E) The Annual Report
Correct Answer: D) The Balance Sheet
Rationale: The Balance Sheet is a snapshot of the company's financial position. It shows
what the company owns (assets), what it owes (liabilities), and the net worth of the owners
(owners' equity) on a single, specific day.
Question 6
Which financial statement reports the excess of a company's revenues over its expenses for a
period of time?
A) The Balance Sheet
B) The Income Statement
C) The Statement of Cash Flows
D) The Statement of Owners' Equity
E) The General Ledger
Correct Answer: B) The Income Statement
Rationale: The Income Statement, also known as the Profit and Loss (P&L) statement,
summarizes a company's financial performance over a period (e.g., a month, quarter, or
year) by subtracting expenses from revenues to arrive at net income.
Question 7
Which private body is responsible for establishing generally accepted accounting principles
(GAAP) in the United States?
A) The Securities and Exchange Commission (SEC)
B) The International Accounting Standards Board (IASB)
C) The Internal Revenue Service (IRS)
D) The American Institute of Certified Public Accountants (AICPA)
E) The Financial Accounting Standards Board (FASB)
Correct Answer: E) The Financial Accounting Standards Board (FASB)
Rationale: The FASB is the designated private-sector organization in the U.S. that has the
, [Type here]
primary responsibility for establishing accounting and financial reporting standards for
non-governmental entities.
Question 8
Which U.S. government agency has the legal authority to regulate U.S. stock exchanges and to
oversee the production of financial statements by publicly traded companies?
A) The Internal Revenue Service (IRS)
B) The Financial Accounting Standards Board (FASB)
C) The Public Company Accounting Oversight Board (PCAOB)
D) The Securities and Exchange Commission (SEC)
E) The International Accounting Standards Board (IASB)
Correct Answer: D) The Securities and Exchange Commission (SEC)
Rationale: The SEC is an independent agency of the U.S. federal government whose
primary mission is to protect investors and maintain fair, orderly, and efficient markets.
While it delegates much of the rule-making to the FASB, it retains the ultimate legal
authority over financial reporting for public companies.
Question 9
What is the fundamental accounting equation?
A) Assets = Liabilities - Owners' Equity
B) Assets + Liabilities = Owners' Equity
C) Assets = Liabilities + Owners' Equity
D) Revenues - Expenses = Assets
E) Assets + Owners' Equity = Liabilities
Correct Answer: C) Assets = Liabilities + Owners' Equity
Rationale: This equation is the foundation of double-entry bookkeeping and the balance
sheet. It states that a company's resources (assets) are financed by either debt (liabilities) or
the investment of the owners (owners' equity).
Question 10
In what order are assets typically listed on a U.S. balance sheet?
A) In alphabetical order.
