UNIFORM CPA Exam Practice Questions
And Correct Answers (Verified Answers)
Plus Rationales 2026 Q&A | Instant
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1. Which of the following is the primary objective of financial
accounting?
A. To provide tax authorities with information
B. To provide useful financial information to external users
C. To minimize reporting costs
D. To maximize management efficiency
Correct Answer: B
Rationale: Financial accounting is primarily designed to provide relevant
and reliable financial information to external users such as investors,
creditors, and regulators for decision-making.
2. Under GAAP, which financial statement is prepared first?
A. Balance Sheet
B. Statement of Cash Flows
C. Income Statement
D. Statement of Retained Earnings
Correct Answer: C
Rationale: The income statement is prepared first because net income is
required for the statement of retained earnings and subsequently the
balance sheet.
, 3. Which audit opinion indicates the financial statements are fairly
presented in all material respects?
A. Disclaimer opinion
B. Adverse opinion
C. Unqualified opinion
D. Qualified opinion
Correct Answer: C
Rationale: An unqualified opinion indicates that the financial statements
are presented fairly in accordance with GAAP.
4. Which of the following is NOT a characteristic of a corporation?
A. Limited liability
B. Perpetual existence
C. Mutual agency
D. Separate legal entity
Correct Answer: C
Rationale: Mutual agency applies to partnerships, not corporations.
5. Which inventory costing method assumes the oldest costs are
assigned to cost of goods sold first?
A. FIFO
B. LIFO
C. Weighted average
D. Specific identification
Correct Answer: A
Rationale: FIFO assumes the first goods purchased are the first sold,
leaving newer costs in ending inventory.
6. What is the effect of depreciation on the accounting equation?
,A. Increases assets and equity
B. Decreases assets and equity
C. Decreases assets and liabilities
D. Increases liabilities and expenses
Correct Answer: B
Rationale: Depreciation reduces asset value and is recorded as an expense,
reducing retained earnings (equity).
7. Which of the following is a current liability?
A. Mortgage payable due in 5 years
B. Accounts payable
C. Bonds payable due in 10 years
D. Goodwill
Correct Answer: B
Rationale: Accounts payable is due within one year and is classified as a
current liability.
8. Which ratio measures a firm’s ability to meet short-term obligations?
A. Debt-to-equity ratio
B. Current ratio
C. Earnings per share
D. Return on assets
Correct Answer: B
Rationale: The current ratio compares current assets to current liabilities to
assess liquidity.
9. Which standard governs ethical behavior for CPAs?
A. IFRS
B. GAAP
, C. AICPA Code of Professional Conduct
D. SEC regulations
Correct Answer: C
Rationale: The AICPA Code provides ethical standards for CPA professional
conduct.
10. Which of the following is an example of an operating activity in
the statement of cash flows?
A. Purchase of equipment
B. Issuance of stock
C. Payment to suppliers
D. Loan repayment
Correct Answer: C
Rationale: Payments to suppliers are part of operating activities.
11. Which financial statement reports changes in equity?
A. Income Statement
B. Statement of Cash Flows
C. Statement of Retained Earnings
D. Balance Sheet
Correct Answer: C
Rationale: The statement of retained earnings shows changes in equity
over a period.
12. Revenue is recognized when:
A. Cash is received
B. It is earned and realizable
C. Invoice is sent
D. Goods are ordered
And Correct Answers (Verified Answers)
Plus Rationales 2026 Q&A | Instant
Download Pdf
1. Which of the following is the primary objective of financial
accounting?
A. To provide tax authorities with information
B. To provide useful financial information to external users
C. To minimize reporting costs
D. To maximize management efficiency
Correct Answer: B
Rationale: Financial accounting is primarily designed to provide relevant
and reliable financial information to external users such as investors,
creditors, and regulators for decision-making.
2. Under GAAP, which financial statement is prepared first?
A. Balance Sheet
B. Statement of Cash Flows
C. Income Statement
D. Statement of Retained Earnings
Correct Answer: C
Rationale: The income statement is prepared first because net income is
required for the statement of retained earnings and subsequently the
balance sheet.
, 3. Which audit opinion indicates the financial statements are fairly
presented in all material respects?
A. Disclaimer opinion
B. Adverse opinion
C. Unqualified opinion
D. Qualified opinion
Correct Answer: C
Rationale: An unqualified opinion indicates that the financial statements
are presented fairly in accordance with GAAP.
4. Which of the following is NOT a characteristic of a corporation?
A. Limited liability
B. Perpetual existence
C. Mutual agency
D. Separate legal entity
Correct Answer: C
Rationale: Mutual agency applies to partnerships, not corporations.
5. Which inventory costing method assumes the oldest costs are
assigned to cost of goods sold first?
A. FIFO
B. LIFO
C. Weighted average
D. Specific identification
Correct Answer: A
Rationale: FIFO assumes the first goods purchased are the first sold,
leaving newer costs in ending inventory.
6. What is the effect of depreciation on the accounting equation?
,A. Increases assets and equity
B. Decreases assets and equity
C. Decreases assets and liabilities
D. Increases liabilities and expenses
Correct Answer: B
Rationale: Depreciation reduces asset value and is recorded as an expense,
reducing retained earnings (equity).
7. Which of the following is a current liability?
A. Mortgage payable due in 5 years
B. Accounts payable
C. Bonds payable due in 10 years
D. Goodwill
Correct Answer: B
Rationale: Accounts payable is due within one year and is classified as a
current liability.
8. Which ratio measures a firm’s ability to meet short-term obligations?
A. Debt-to-equity ratio
B. Current ratio
C. Earnings per share
D. Return on assets
Correct Answer: B
Rationale: The current ratio compares current assets to current liabilities to
assess liquidity.
9. Which standard governs ethical behavior for CPAs?
A. IFRS
B. GAAP
, C. AICPA Code of Professional Conduct
D. SEC regulations
Correct Answer: C
Rationale: The AICPA Code provides ethical standards for CPA professional
conduct.
10. Which of the following is an example of an operating activity in
the statement of cash flows?
A. Purchase of equipment
B. Issuance of stock
C. Payment to suppliers
D. Loan repayment
Correct Answer: C
Rationale: Payments to suppliers are part of operating activities.
11. Which financial statement reports changes in equity?
A. Income Statement
B. Statement of Cash Flows
C. Statement of Retained Earnings
D. Balance Sheet
Correct Answer: C
Rationale: The statement of retained earnings shows changes in equity
over a period.
12. Revenue is recognized when:
A. Cash is received
B. It is earned and realizable
C. Invoice is sent
D. Goods are ordered
