CPA Practice Questions and
Answers.
In analysing a company's financial statements, which financial statement would a potential investor
use primarily to assess the company's liquidity and financial flexibility? - Answer Balance Sheet
The information provided by financial reporting pertains to - Answer Individual 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. - Answer it is a violation of SEC regulations for publicly
traded companies to depart from GAAP.
What group currently writes the Generally Accepted Accounting Principles? - Answer Financial
Accounting Standards Board
The purpose of financial accounting is to provide information primarily for which of the following
groups? - Answer Investors and creditors
The FASB is a - Answer private sector body
Which of the following statements includes the most useful guidance for practicing accountants
concerning the FASB Accounting Standards Codification? - Answer the Codification is the sole source
of U.S. GAAP, for nongovernmental entities.
Which of the following accounting pronouncements is the most authoritative? - Answer The 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? - Answer proposed accounting standards update.
What is the primary protection for investors against fraudulent financial reporting by corporations? -
Answer the requirement that financial statements be audited.
What is the conceptual framework intended to establish? - Answer the 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: - Answer the needs of the users of the information.
According to the FASB conceptual framework, which of the following is not an enhancing qualitative
characteristic? - Answer Confirmatory value
Under Statement of Financial Accounting Concepts (SFAC) 8, predictive value is an ingredient of the
fundamental quality of - Answer Relevance
Under Statement of Financial Accounting Concepts (SFAC) 8, which of the following relates to both
relevance and faithful representation? - Answer Timeliness
According to the FASB Conceptual Framework, what does the concept of faithful representation in
financial reporting include? - Answer Neutrality
According to the conceptual framework, the process of reporting an item in the financial statements
of an entity is: - Answer Recognition
Which of the following is an example of the expense recognition principle of associating cause and
effect? - Answer Sales commissions
Andes 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: - Answer Matching
According to the conceptual framework, the usefulness of providing information in financial
statements is subject to the constraint of: - Answer cost-benefit
Doreen 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 totalled $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
Answers.
In analysing a company's financial statements, which financial statement would a potential investor
use primarily to assess the company's liquidity and financial flexibility? - Answer Balance Sheet
The information provided by financial reporting pertains to - Answer Individual 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. - Answer it is a violation of SEC regulations for publicly
traded companies to depart from GAAP.
What group currently writes the Generally Accepted Accounting Principles? - Answer Financial
Accounting Standards Board
The purpose of financial accounting is to provide information primarily for which of the following
groups? - Answer Investors and creditors
The FASB is a - Answer private sector body
Which of the following statements includes the most useful guidance for practicing accountants
concerning the FASB Accounting Standards Codification? - Answer the Codification is the sole source
of U.S. GAAP, for nongovernmental entities.
Which of the following accounting pronouncements is the most authoritative? - Answer The 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? - Answer proposed accounting standards update.
What is the primary protection for investors against fraudulent financial reporting by corporations? -
Answer the requirement that financial statements be audited.
What is the conceptual framework intended to establish? - Answer the 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: - Answer the needs of the users of the information.
According to the FASB conceptual framework, which of the following is not an enhancing qualitative
characteristic? - Answer Confirmatory value
Under Statement of Financial Accounting Concepts (SFAC) 8, predictive value is an ingredient of the
fundamental quality of - Answer Relevance
Under Statement of Financial Accounting Concepts (SFAC) 8, which of the following relates to both
relevance and faithful representation? - Answer Timeliness
According to the FASB Conceptual Framework, what does the concept of faithful representation in
financial reporting include? - Answer Neutrality
According to the conceptual framework, the process of reporting an item in the financial statements
of an entity is: - Answer Recognition
Which of the following is an example of the expense recognition principle of associating cause and
effect? - Answer Sales commissions
Andes 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: - Answer Matching
According to the conceptual framework, the usefulness of providing information in financial
statements is subject to the constraint of: - Answer cost-benefit
Doreen 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 totalled $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
