CPA Exam Review 2026 answers
Managerial Accounting deals with _____ accounting, while Financial Accounting deals with
_____. - correct answers Internal; External
True or False:
Managerial accounting must follow GAAP. - correct answers False; Internal accounting so it
does not have to follow GAAP.
The assumption that a company or other entity will be able to continue operating for a time
that is sufficient to carry out its commitments and obligations. - correct answers Going
Concern
The assumption that a company's business cycle can be broken into periods (i.e. one year,
one quarter, etc.) - correct answers Periodicity
Accounting is reported as units of currency (i.e. dollars and cents); not indexed for inflation -
correct answers Monetary Unit
An accounting principle that allows the accountant to keep business separate from personal
(excludes legal) - correct answers Economic Entity
What is the general rule for capitalization of Research & Development costs? - correct
answers You can't capitalize R&D
True or False:
You accrue a contingency deemed to be reasonably possible - correct answers False: you
accrue contingencies deemed to be probable.
, FASB ASC includes guidance for the _____. - correct answers SEC
Accounting information that enables comparing a company's reporting of one accounting
period to another. - correct answers Consistency
Principle that requires companies to match expenses with related revenues - correct answers
Matching
What the company actually does vs. what the company says it does. - correct answers
Substance over form
FASB conceptual framework says that for financial reporting to be useful it must ______. -
correct answers Provide information useful for making business and investment decisions.
Materiality and Relevance are both defined by: - correct answers What influences or makes a
difference to a decision maker
Principle that states that the cost of providing financial information must not outweigh the
benefits of that information to the users - correct answers Cost-benefit
Information is verifiable, objective and you can depend on it - correct answers Reliability
The concept that financial statements be produced that accurately reflect the condition of a
company - correct answers Faithful Representation
What does the income statement show - correct answers Profits of the company
A probable, future economic benefit obtained or controlled from a past transaction - correct
answers Asset
Managerial Accounting deals with _____ accounting, while Financial Accounting deals with
_____. - correct answers Internal; External
True or False:
Managerial accounting must follow GAAP. - correct answers False; Internal accounting so it
does not have to follow GAAP.
The assumption that a company or other entity will be able to continue operating for a time
that is sufficient to carry out its commitments and obligations. - correct answers Going
Concern
The assumption that a company's business cycle can be broken into periods (i.e. one year,
one quarter, etc.) - correct answers Periodicity
Accounting is reported as units of currency (i.e. dollars and cents); not indexed for inflation -
correct answers Monetary Unit
An accounting principle that allows the accountant to keep business separate from personal
(excludes legal) - correct answers Economic Entity
What is the general rule for capitalization of Research & Development costs? - correct
answers You can't capitalize R&D
True or False:
You accrue a contingency deemed to be reasonably possible - correct answers False: you
accrue contingencies deemed to be probable.
, FASB ASC includes guidance for the _____. - correct answers SEC
Accounting information that enables comparing a company's reporting of one accounting
period to another. - correct answers Consistency
Principle that requires companies to match expenses with related revenues - correct answers
Matching
What the company actually does vs. what the company says it does. - correct answers
Substance over form
FASB conceptual framework says that for financial reporting to be useful it must ______. -
correct answers Provide information useful for making business and investment decisions.
Materiality and Relevance are both defined by: - correct answers What influences or makes a
difference to a decision maker
Principle that states that the cost of providing financial information must not outweigh the
benefits of that information to the users - correct answers Cost-benefit
Information is verifiable, objective and you can depend on it - correct answers Reliability
The concept that financial statements be produced that accurately reflect the condition of a
company - correct answers Faithful Representation
What does the income statement show - correct answers Profits of the company
A probable, future economic benefit obtained or controlled from a past transaction - correct
answers Asset
