Certified Public Accountant Examination
Questions With Correct Answers (Verified
Answers) Plus Rationales 2026 Q&A | Instant
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1. Which financial statement reports a company's revenues and
expenses over a period of time?
A. Balance Sheet
B. Statement of Cash Flows
C. Statement of Changes in Equity
D. Income Statement
Rationale: The income statement summarizes revenues, expenses,
gains, and losses over a specific accounting period and ultimately
reports net income or net loss.
2. Under accrual accounting, revenue is generally recognized when:
A. Cash is received
B. The invoice is mailed
,C. The performance obligation is satisfied
D. The customer pays in full
Rationale: Accrual accounting recognizes revenue when earned, not
necessarily when cash is received. Revenue is recognized when the
entity satisfies its performance obligations.
3. Which of the following is classified as a current asset?
A. Building
B. Patent
C. Accounts Receivable
D. Bonds Payable
Rationale: Accounts receivable are expected to be converted into cash
within one operating cycle or one year, making them current assets.
4. The accounting equation is:
A. Assets = Liabilities − Equity
B. Equity = Assets + Liabilities
C. Assets = Liabilities + Equity
D. Assets + Equity = Liabilities
Rationale: The fundamental accounting equation reflects the
relationship between a company's resources and the claims against
those resources.
, 5. Depreciation is best described as:
A. A valuation method for inventory
B. A process of recording market value changes
C. The allocation of an asset's cost over its useful life
D. A cash reserve for replacement assets
Rationale: Depreciation allocates the cost of a tangible asset to
expense over the periods benefiting from its use.
6. Which inventory costing method often results in higher ending
inventory during periods of rising prices?
A. LIFO
B. Weighted Average
C. Specific Identification
D. FIFO
Rationale: FIFO assumes older, lower-cost inventory is sold first,
leaving newer, higher-cost inventory in ending inventory.
7. What is the primary purpose of an audit?
A. Guarantee profitability
B. Detect all fraud
C. Prepare tax returns
D. Provide reasonable assurance about financial statements
, Rationale: Audits provide reasonable, not absolute, assurance that
financial statements are free from material misstatement.
8. Materiality refers to:
A. The size of a company
B. Audit fees charged
C. The significance of information to users' decisions
D. Inventory quantities
Rationale: Information is material if its omission or misstatement
could influence decisions made by users of financial statements.
9. Which assertion relates to whether recorded assets actually exist?
A. Completeness
B. Rights and Obligations
C. Valuation
D. Existence
Rationale: The existence assertion addresses whether reported assets
and liabilities are real and present at the reporting date.
10. Internal controls are primarily designed to:
A. Eliminate all business risk
B. Increase sales revenue
Questions With Correct Answers (Verified
Answers) Plus Rationales 2026 Q&A | Instant
Download Pdf
1. Which financial statement reports a company's revenues and
expenses over a period of time?
A. Balance Sheet
B. Statement of Cash Flows
C. Statement of Changes in Equity
D. Income Statement
Rationale: The income statement summarizes revenues, expenses,
gains, and losses over a specific accounting period and ultimately
reports net income or net loss.
2. Under accrual accounting, revenue is generally recognized when:
A. Cash is received
B. The invoice is mailed
,C. The performance obligation is satisfied
D. The customer pays in full
Rationale: Accrual accounting recognizes revenue when earned, not
necessarily when cash is received. Revenue is recognized when the
entity satisfies its performance obligations.
3. Which of the following is classified as a current asset?
A. Building
B. Patent
C. Accounts Receivable
D. Bonds Payable
Rationale: Accounts receivable are expected to be converted into cash
within one operating cycle or one year, making them current assets.
4. The accounting equation is:
A. Assets = Liabilities − Equity
B. Equity = Assets + Liabilities
C. Assets = Liabilities + Equity
D. Assets + Equity = Liabilities
Rationale: The fundamental accounting equation reflects the
relationship between a company's resources and the claims against
those resources.
, 5. Depreciation is best described as:
A. A valuation method for inventory
B. A process of recording market value changes
C. The allocation of an asset's cost over its useful life
D. A cash reserve for replacement assets
Rationale: Depreciation allocates the cost of a tangible asset to
expense over the periods benefiting from its use.
6. Which inventory costing method often results in higher ending
inventory during periods of rising prices?
A. LIFO
B. Weighted Average
C. Specific Identification
D. FIFO
Rationale: FIFO assumes older, lower-cost inventory is sold first,
leaving newer, higher-cost inventory in ending inventory.
7. What is the primary purpose of an audit?
A. Guarantee profitability
B. Detect all fraud
C. Prepare tax returns
D. Provide reasonable assurance about financial statements
, Rationale: Audits provide reasonable, not absolute, assurance that
financial statements are free from material misstatement.
8. Materiality refers to:
A. The size of a company
B. Audit fees charged
C. The significance of information to users' decisions
D. Inventory quantities
Rationale: Information is material if its omission or misstatement
could influence decisions made by users of financial statements.
9. Which assertion relates to whether recorded assets actually exist?
A. Completeness
B. Rights and Obligations
C. Valuation
D. Existence
Rationale: The existence assertion addresses whether reported assets
and liabilities are real and present at the reporting date.
10. Internal controls are primarily designed to:
A. Eliminate all business risk
B. Increase sales revenue
