NASCLA Construction Accounting
Exam Practice Questions And Correct
Answers (Verified Answers) Plus
Rationales 2027 Q&A | Instant
Download Pdf
1. Which accounting method recognizes revenues and expenses when
they are earned or incurred rather than only when cash is received or
paid?
A. Cash-basis accounting
B. Modified cash accounting
C. Accrual-basis accounting
D. Single-entry accounting
Rationale: Accrual accounting records economic activity in the period to
which it relates, regardless of the exact timing of cash movement. This
,method is particularly important in construction because projects
commonly span multiple accounting periods.
2. What is the fundamental accounting equation?
A. Revenue = Assets + Liabilities
B. Assets = Revenue − Expenses
C. Assets = Liabilities + Owner's Equity
D. Expenses = Assets + Equity
Rationale: The accounting equation establishes the fundamental
relationship among assets, liabilities, and equity. Every properly recorded
accounting transaction must preserve this relationship.
3. Which account normally carries a debit balance?
A. Accounts payable
B. Construction revenue
C. Equipment
D. Owner's capital
,Rationale: Asset accounts normally carry debit balances. Equipment is an
asset, while liabilities, revenues, and equity accounts normally carry credit
balances.
4. Which account normally carries a credit balance?
A. Cash
B. Accounts receivable
C. Equipment
D. Accounts payable
Rationale: Accounts payable is a liability and normally carries a credit
balance. Recording an increase in a liability generally requires a credit
entry.
5. A contractor receives $40,000 cash from a customer who previously
owed the company money. What is the accounting effect?
A. Cash decreases and revenue increases
B. Cash increases and accounts receivable decreases
C. Cash increases and accounts payable decreases
D. Revenue decreases and cash increases
, Rationale: The collection converts an existing receivable into cash. Because
the revenue was previously recognized when earned, the collection does
not create new revenue at the time of receipt.
6. A contractor purchases $25,000 of materials on credit for a project.
Which entry is generally appropriate when the materials are received?
A. Debit accounts payable; credit materials
B. Debit materials or inventory; credit accounts payable
C. Debit revenue; credit cash
D. Debit cash; credit revenue
Rationale: Receiving materials increases an asset or project-material
account and creates an obligation to the supplier. Therefore, the asset is
debited and accounts payable is credited.
7. What is a general ledger?
A. A list of only unpaid customer invoices
B. A schedule of employee working hours
C. The central collection of accounts used to record and summarize
financial transactions
Exam Practice Questions And Correct
Answers (Verified Answers) Plus
Rationales 2027 Q&A | Instant
Download Pdf
1. Which accounting method recognizes revenues and expenses when
they are earned or incurred rather than only when cash is received or
paid?
A. Cash-basis accounting
B. Modified cash accounting
C. Accrual-basis accounting
D. Single-entry accounting
Rationale: Accrual accounting records economic activity in the period to
which it relates, regardless of the exact timing of cash movement. This
,method is particularly important in construction because projects
commonly span multiple accounting periods.
2. What is the fundamental accounting equation?
A. Revenue = Assets + Liabilities
B. Assets = Revenue − Expenses
C. Assets = Liabilities + Owner's Equity
D. Expenses = Assets + Equity
Rationale: The accounting equation establishes the fundamental
relationship among assets, liabilities, and equity. Every properly recorded
accounting transaction must preserve this relationship.
3. Which account normally carries a debit balance?
A. Accounts payable
B. Construction revenue
C. Equipment
D. Owner's capital
,Rationale: Asset accounts normally carry debit balances. Equipment is an
asset, while liabilities, revenues, and equity accounts normally carry credit
balances.
4. Which account normally carries a credit balance?
A. Cash
B. Accounts receivable
C. Equipment
D. Accounts payable
Rationale: Accounts payable is a liability and normally carries a credit
balance. Recording an increase in a liability generally requires a credit
entry.
5. A contractor receives $40,000 cash from a customer who previously
owed the company money. What is the accounting effect?
A. Cash decreases and revenue increases
B. Cash increases and accounts receivable decreases
C. Cash increases and accounts payable decreases
D. Revenue decreases and cash increases
, Rationale: The collection converts an existing receivable into cash. Because
the revenue was previously recognized when earned, the collection does
not create new revenue at the time of receipt.
6. A contractor purchases $25,000 of materials on credit for a project.
Which entry is generally appropriate when the materials are received?
A. Debit accounts payable; credit materials
B. Debit materials or inventory; credit accounts payable
C. Debit revenue; credit cash
D. Debit cash; credit revenue
Rationale: Receiving materials increases an asset or project-material
account and creates an obligation to the supplier. Therefore, the asset is
debited and accounts payable is credited.
7. What is a general ledger?
A. A list of only unpaid customer invoices
B. A schedule of employee working hours
C. The central collection of accounts used to record and summarize
financial transactions
