ARKANSAS ACCOUNTANCY LICENSING REAL
EXAMINATION QUESTIONS WITH CORRECT
ANSWERS LATEST 2025-2026 UPDATE
Questions 1–10
Question 1
Which financial statement reports a company's financial position at a specific point in time?
A. Income Statement
B. Statement of Cash Flows
C. Balance Sheet
D. Statement of Retained Earnings
Correct Answer: C
Rationale: The balance sheet reports assets, liabilities, and equity as of a specific date.
Question 2
Which accounting principle requires revenue to be recognized when it is earned rather than when
cash is received?
A. Conservatism
B. Revenue Recognition Principle
C. Cost Principle
D. Materiality Principle
Correct Answer: B
Rationale: Under accrual accounting, revenue is recognized when earned regardless of when
payment is received.
,Question 3
The primary objective of an independent financial statement audit is to:
A. Detect every fraud.
B. Prepare the client's financial statements.
C. Express an opinion on whether the financial statements are fairly presented.
D. Guarantee the company's financial success.
Correct Answer: C
Rationale: Auditors provide reasonable assurance that financial statements are free of material
misstatement and express an independent opinion.
Question 4
A debit to Cash and a credit to Accounts Receivable records:
A. Purchase of inventory.
B. Collection of an outstanding customer account.
C. Payment of accounts payable.
D. Depreciation expense.
Correct Answer: B
Rationale: Collecting receivables increases cash while reducing Accounts Receivable.
Question 5
Which inventory costing method assumes the newest inventory is sold first?
A. FIFO
B. Specific Identification
, C. LIFO
D. Weighted Average
Correct Answer: C
Rationale: Last-In, First-Out assumes the latest inventory purchased is sold first.
Question 6
Which internal control is most effective in preventing employee fraud?
A. Allowing one employee to perform all accounting functions
B. Segregation of duties
C. Eliminating documentation
D. Using manual calculations only
Correct Answer: B
Rationale: Separating authorization, custody, and recordkeeping reduces opportunities for fraud.
Question 7
Depreciation is intended to:
A. Measure current market value.
B. Allocate an asset's cost over its useful life.
C. Estimate replacement cost.
D. Reduce taxes only.
Correct Answer: B
Rationale: Depreciation systematically allocates the historical cost of a long-lived asset.
EXAMINATION QUESTIONS WITH CORRECT
ANSWERS LATEST 2025-2026 UPDATE
Questions 1–10
Question 1
Which financial statement reports a company's financial position at a specific point in time?
A. Income Statement
B. Statement of Cash Flows
C. Balance Sheet
D. Statement of Retained Earnings
Correct Answer: C
Rationale: The balance sheet reports assets, liabilities, and equity as of a specific date.
Question 2
Which accounting principle requires revenue to be recognized when it is earned rather than when
cash is received?
A. Conservatism
B. Revenue Recognition Principle
C. Cost Principle
D. Materiality Principle
Correct Answer: B
Rationale: Under accrual accounting, revenue is recognized when earned regardless of when
payment is received.
,Question 3
The primary objective of an independent financial statement audit is to:
A. Detect every fraud.
B. Prepare the client's financial statements.
C. Express an opinion on whether the financial statements are fairly presented.
D. Guarantee the company's financial success.
Correct Answer: C
Rationale: Auditors provide reasonable assurance that financial statements are free of material
misstatement and express an independent opinion.
Question 4
A debit to Cash and a credit to Accounts Receivable records:
A. Purchase of inventory.
B. Collection of an outstanding customer account.
C. Payment of accounts payable.
D. Depreciation expense.
Correct Answer: B
Rationale: Collecting receivables increases cash while reducing Accounts Receivable.
Question 5
Which inventory costing method assumes the newest inventory is sold first?
A. FIFO
B. Specific Identification
, C. LIFO
D. Weighted Average
Correct Answer: C
Rationale: Last-In, First-Out assumes the latest inventory purchased is sold first.
Question 6
Which internal control is most effective in preventing employee fraud?
A. Allowing one employee to perform all accounting functions
B. Segregation of duties
C. Eliminating documentation
D. Using manual calculations only
Correct Answer: B
Rationale: Separating authorization, custody, and recordkeeping reduces opportunities for fraud.
Question 7
Depreciation is intended to:
A. Measure current market value.
B. Allocate an asset's cost over its useful life.
C. Estimate replacement cost.
D. Reduce taxes only.
Correct Answer: B
Rationale: Depreciation systematically allocates the historical cost of a long-lived asset.
