Alabama Certified Public Accountant (CPA)
Exam Practice Test Questions With Correct
Answers (Verified Answers) Plus Rationales
2026 Q&A | Instant Download Pdf
1. A company recognizes revenue when:
A. Cash is received
B. Goods are ordered
C. Performance obligations are satisfied
D. Expenses are paid
Answer: C
Rationale: Under accrual accounting and ASC 606, revenue is
recognized when the entity satisfies a performance obligation by
transferring control of goods or services to the customer, not when
cash is received or expenses are paid.
2. Which financial statement shows a company’s financial position at
a point in time?
, A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
Answer: C
Rationale: The balance sheet reports assets, liabilities, and equity at a
specific date, reflecting the company’s financial position at a point in
time.
3. The primary objective of an external audit is to:
A. Detect all fraud
B. Prepare financial statements
C. Provide assurance on financial statements
D. Manage internal controls
Answer: C
Rationale: External auditors provide reasonable assurance that
financial statements are free from material misstatement, whether
due to error or fraud.
, 4. GAAP stands for:
A. Government Auditing and Accounting Procedures
B. Generally Accepted Auditing Principles
C. Generally Accepted Accounting Principles
D. Global Accounting Analysis Policy
Answer: C
Rationale: GAAP refers to standardized accounting principles used in
the preparation of financial statements in the United States.
5. Which of the following is classified as a current asset?
A. Land
B. Equipment
C. Accounts receivable
D. Goodwill
Answer: C
Rationale: Accounts receivable is expected to be collected within one
year and is therefore a current asset.
6. Depreciation is best described as:
A. Cash outflow
, B. Allocation of asset cost over useful life
C. Market value reduction
D. Liability reduction
Answer: B
Rationale: Depreciation systematically allocates the cost of a tangible
asset over its useful life, not reflecting market value.
7. Which audit opinion indicates the financial statements are fairly
presented?
A. Adverse opinion
B. Disclaimer of opinion
C. Unqualified opinion
D. Qualified opinion
Answer: C
Rationale: An unqualified (clean) opinion indicates the financial
statements are presented fairly in all material respects.
8. The matching principle requires:
A. Matching revenue with expenses incurred to generate them
B. Matching assets with liabilities
Exam Practice Test Questions With Correct
Answers (Verified Answers) Plus Rationales
2026 Q&A | Instant Download Pdf
1. A company recognizes revenue when:
A. Cash is received
B. Goods are ordered
C. Performance obligations are satisfied
D. Expenses are paid
Answer: C
Rationale: Under accrual accounting and ASC 606, revenue is
recognized when the entity satisfies a performance obligation by
transferring control of goods or services to the customer, not when
cash is received or expenses are paid.
2. Which financial statement shows a company’s financial position at
a point in time?
, A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
Answer: C
Rationale: The balance sheet reports assets, liabilities, and equity at a
specific date, reflecting the company’s financial position at a point in
time.
3. The primary objective of an external audit is to:
A. Detect all fraud
B. Prepare financial statements
C. Provide assurance on financial statements
D. Manage internal controls
Answer: C
Rationale: External auditors provide reasonable assurance that
financial statements are free from material misstatement, whether
due to error or fraud.
, 4. GAAP stands for:
A. Government Auditing and Accounting Procedures
B. Generally Accepted Auditing Principles
C. Generally Accepted Accounting Principles
D. Global Accounting Analysis Policy
Answer: C
Rationale: GAAP refers to standardized accounting principles used in
the preparation of financial statements in the United States.
5. Which of the following is classified as a current asset?
A. Land
B. Equipment
C. Accounts receivable
D. Goodwill
Answer: C
Rationale: Accounts receivable is expected to be collected within one
year and is therefore a current asset.
6. Depreciation is best described as:
A. Cash outflow
, B. Allocation of asset cost over useful life
C. Market value reduction
D. Liability reduction
Answer: B
Rationale: Depreciation systematically allocates the cost of a tangible
asset over its useful life, not reflecting market value.
7. Which audit opinion indicates the financial statements are fairly
presented?
A. Adverse opinion
B. Disclaimer of opinion
C. Unqualified opinion
D. Qualified opinion
Answer: C
Rationale: An unqualified (clean) opinion indicates the financial
statements are presented fairly in all material respects.
8. The matching principle requires:
A. Matching revenue with expenses incurred to generate them
B. Matching assets with liabilities
