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CPA Practice Questions WITH CORRECT ANSWERS
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CPA Practice QuestionsIn analyzing a company's financial statements, which financial statement would a
potential investor use primarily to assess the company's liquidity and financial flexibility?
- answerBalance Sheet
The information provided by financial reporting pertains to - answerIndividual business
enterprises, rather than to industries or an economy as a whole or to members of
society as consumers.
Choose the correct statement about GAAP. - answerIt is a violation of SEC regulations
for publicly traded companies to depart from GAAP.
What group currently writes the Generally Accepted Accounting Principles? -
answerFinancial Accounting Standards Board
The purpose of financial accounting is to provide information primarily for which of the
following groups? - answerInvestors and creditors
The FASB is a - answerprivate sector body
Which of the following statements includes the most useful guidance for practicing
accountants concerning the FASB Accounting Standards Codification? - answerThe
Codification is the sole source of U.S. GAAP, for nongovernmental entities.
Which of the following accounting pronouncements is the most authoritative? -
answerThe FASB Accounting Standards Codification.
Which of the following documents is typically issued as part of the due-process activities
of the Financial Accounting Standards Board (FASB) for amending the FASB
Accounting Standards Codification? - answerA proposed accounting standards update.
What is the primary protection for investors against fraudulent financial reporting by
corporations? - answerThe requirement that financial statements be audited.
, What is the conceptual framework intended to establish? - answerThe objectives and
concepts for use in developing standards of financial accounting and reporting.
According to the conceptual framework, the objectives of financial reporting for business
enterprises are based on: - answerThe needs of the users of the information.
According to the FASB conceptual framework, which of the following is not an
enhancing qualitative characteristic? - answerConfirmatory value
Under Statement of Financial Accounting Concepts (SFAC) 8, predictive value is an
ingredient of the fundamental quality of - answerRelevance
Under Statement of Financial Accounting Concepts (SFAC) 8, which of the following
relates to both relevance and faithful representation? - answerTimeliness
According to the FASB Conceptual Framework, what does the concept of faithful
representation in financial reporting include? - answerNeutrality
According to the conceptual framework, the process of reporting an item in the financial
statements of an entity is: - answerRecognition
Which of the following is an example of the expense recognition principle of associating
cause and effect? - answerSales commissions
Ande Co. estimates uncollectible accounts expense using the ratio of past actual losses
from uncollectible accounts to past net credit sales, adjusted for anticipated conditions.
The practice follows the accounting concept of: - answerMatching
According to the conceptual framework, the usefulness of providing information in
financial statements is subject to the constraint of: - answercost-benefit
Doren Co.'s officers' compensation expense account had a balance of $490,000 at
December 31, 2016, before any appropriate year-end adjustment relating to the
following:
• No Salary accrual was made for the week of December 25-31, 2016. Officers' salaries
for this period totaled $18,000 and were paid on January 5, 2017.
• Bonuses to officers for 2016 were paid on January 31, 2017 in the total amount of
$175,000.
The adjusted balance for officers' compensation expense for the year ended December
31, 2016 should be: - answer683,000
Pak Co.'s professional fees expense account had a balance of $82,000 on December
31, 2016, before considering year-end adjustments relating to the following:
• Consultants were hired for a special project at a total fee not to exceed $65,000. Pak
has recorded $55,000 of this fee based on billings for work performed in 2016.
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