Certified Accounting Technician (CAT)
Practice Exam Questions And Correct
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Rationales 2025|2026 Q&A | Instant
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1. Which of the following is an example of a current asset?
A. Buildings
B. Accounts receivable
C. Equipment
D. Patents
Rationale: Current assets are those expected to be converted to cash
within one year, and accounts receivable meet that criterion.
2. The accounting equation is:
A. Assets – Liabilities = Owner’s Drawings
B. Assets = Liabilities + Owner’s Equity
,C. Assets + Liabilities = Owner’s Equity
D. Assets = Liabilities – Owner’s Equity
Rationale: The basic accounting equation ensures that a company’s assets
are financed by either liabilities or owner’s equity.
3. Which of the following accounts normally has a debit balance?
A. Accounts payable
B. Cash
C. Capital
D. Revenue
Rationale: Asset accounts like cash usually carry a debit balance.
4. Depreciation is recorded to:
A. Increase the book value of assets
B. Allocate the cost of an asset over its useful life
C. Recognize an increase in market value
D. Record a liability
Rationale: Depreciation allocates the cost of a fixed asset systematically
over its useful life.
5. The trial balance is prepared to:
A. Record transactions
B. Check the mathematical accuracy of ledger balances
C. Prepare financial statements
D. Analyze business ratios
,Rationale: A trial balance helps ensure that total debits equal total credits
in the ledger.
6. Which of the following represents a liability?
A. Equipment
B. Prepaid rent
C. Accounts payable
D. Retained earnings
Rationale: Accounts payable represent obligations owed to suppliers and
are liabilities.
7. If a business purchases inventory on credit, the effect on the accounting
equation is:
A. Assets decrease, liabilities decrease
B. Assets increase, equity decreases
C. Assets increase, liabilities increase
D. No effect
Rationale: Buying inventory on credit increases assets (inventory) and
liabilities (accounts payable).
8. The double-entry system means:
A. Recording in two books
B. Recording each transaction once
C. Every transaction affects two accounts
D. Each transaction has two journal entries
, Rationale: The double-entry system records equal debits and credits for
m m m m m m m m m
m each transaction.
m
9. A credit entry in an asset account indicates:
m m m m m m m
A. Increase in asset m m
B. Decrease in asset m m
C. Increase in liability
m m
D. Increase in revenue m m
Rationale: Credits reduce asset accounts because assets normally have
m m m m m m m m
m debit balances.
m
10. Which financial statement shows profit or loss?
m m m m m m
A. Balance sheet m
B. Income statementm
C. Cash flow statement
m m
D. Trial balance
m
Rationale: The income statement reports revenues and expenses to
m m m m m m m m
m determine net profit or loss.
m m m m
11. Which of the following is a nominal account?
m m m m m m m
A. Building
B. Accounts receivable m
C. Salaries expensem
D. Capital
Practice Exam Questions And Correct
Answers (Verified Answers) Plus
Rationales 2025|2026 Q&A | Instant
Download Pdf
1. Which of the following is an example of a current asset?
A. Buildings
B. Accounts receivable
C. Equipment
D. Patents
Rationale: Current assets are those expected to be converted to cash
within one year, and accounts receivable meet that criterion.
2. The accounting equation is:
A. Assets – Liabilities = Owner’s Drawings
B. Assets = Liabilities + Owner’s Equity
,C. Assets + Liabilities = Owner’s Equity
D. Assets = Liabilities – Owner’s Equity
Rationale: The basic accounting equation ensures that a company’s assets
are financed by either liabilities or owner’s equity.
3. Which of the following accounts normally has a debit balance?
A. Accounts payable
B. Cash
C. Capital
D. Revenue
Rationale: Asset accounts like cash usually carry a debit balance.
4. Depreciation is recorded to:
A. Increase the book value of assets
B. Allocate the cost of an asset over its useful life
C. Recognize an increase in market value
D. Record a liability
Rationale: Depreciation allocates the cost of a fixed asset systematically
over its useful life.
5. The trial balance is prepared to:
A. Record transactions
B. Check the mathematical accuracy of ledger balances
C. Prepare financial statements
D. Analyze business ratios
,Rationale: A trial balance helps ensure that total debits equal total credits
in the ledger.
6. Which of the following represents a liability?
A. Equipment
B. Prepaid rent
C. Accounts payable
D. Retained earnings
Rationale: Accounts payable represent obligations owed to suppliers and
are liabilities.
7. If a business purchases inventory on credit, the effect on the accounting
equation is:
A. Assets decrease, liabilities decrease
B. Assets increase, equity decreases
C. Assets increase, liabilities increase
D. No effect
Rationale: Buying inventory on credit increases assets (inventory) and
liabilities (accounts payable).
8. The double-entry system means:
A. Recording in two books
B. Recording each transaction once
C. Every transaction affects two accounts
D. Each transaction has two journal entries
, Rationale: The double-entry system records equal debits and credits for
m m m m m m m m m
m each transaction.
m
9. A credit entry in an asset account indicates:
m m m m m m m
A. Increase in asset m m
B. Decrease in asset m m
C. Increase in liability
m m
D. Increase in revenue m m
Rationale: Credits reduce asset accounts because assets normally have
m m m m m m m m
m debit balances.
m
10. Which financial statement shows profit or loss?
m m m m m m
A. Balance sheet m
B. Income statementm
C. Cash flow statement
m m
D. Trial balance
m
Rationale: The income statement reports revenues and expenses to
m m m m m m m m
m determine net profit or loss.
m m m m
11. Which of the following is a nominal account?
m m m m m m m
A. Building
B. Accounts receivable m
C. Salaries expensem
D. Capital
