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ACCT 6301 FINANCIAL ACCOUNTING COMPREHENSIVE
GRADUATE-LEVEL EXAMINATION 2026
FULL PACKAGE STUDY GUIDE
Instructions: Select the single best answer for each question. This examination covers the
fundamental principles, concepts, and applications of financial accounting at the graduate level,
including the accounting cycle, financial statement preparation and analysis, revenue recognition,
asset valuation, liabilities, equity, and statement of cash flows.
Section 1: Conceptual Framework & Accounting Cycle (Questions 1–15)
1. The primary objective of financial reporting is to:
A) Maximize shareholder wealth
B) Provide information useful for making investment and credit decisions
C) Minimize the company's tax liability
D) Ensure the company remains profitable
Explanation: According to the FASB Conceptual Framework, the primary
objective of financial reporting is to provide financial information about the
reporting entity that is useful to existing and potential investors, lenders, and
other creditors in making decisions about providing resources to the entity.
2. Which of the following is NOT a fundamental qualitative characteristic of
useful financial information?
A) Relevance
B) Conservatism
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C) Faithful representation
D) Materiality
Explanation: The fundamental qualitative characteristics are relevance and
faithful representation. Conservatism is a convention, not a fundamental
qualitative characteristic. Enhancing qualitative characteristics include
comparability, verifiability, timeliness, and understandability.
3. Under accrual accounting, revenues are recognized when:
A) Cash is received
B) Earned, regardless of when cash is received
C) The customer places an order
D) The invoice is sent to the customer
Explanation: Under accrual accounting, revenue is recognized when it is
earned—typically when goods are transferred or services are performed—not
necessarily when cash is received. This is the foundation of the revenue
recognition principle.
4. Which of the following accounts is considered a "permanent" (real)
account?
A) Revenue
B) Cash
C) Dividends
D) Expenses
Explanation: Permanent (real) accounts—assets, liabilities, and equity—carry
their balances forward from one accounting period to the next. Temporary
(nominal) accounts—revenues, expenses, and dividends—are closed to retained
earnings at the end of each period.
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5. A company purchases equipment for $50,000, paying $10,000 cash and
signing a note payable for the remainder. The journal entry should include a:
A) **Debit to Equipment $50,000; Credit to Cash $10,000; Credit to Notes
Payable $40,000**
B) Debit to Equipment $50,000; Credit to Cash $50,000
C) Debit to Equipment $10,000; Debit to Notes Payable $40,000; Credit to Cash
$50,000
D) Debit to Equipment $50,000; Credit to Cash $10,000; Credit to Accounts
Payable $40,000
Explanation: The equipment account is debited for the full cost of the asset
acquired. Cash is credited for the amount paid, and a liability (notes payable) is
credited for the amount financed.
6. The adjusting entry to record accrued salaries at year-end includes:
A) A debit to Salaries Payable and a credit to Cash
B) A debit to Salaries Expense and a credit to Salaries Payable
C) A debit to Salaries Expense and a credit to Cash
D) A debit to Salaries Payable and a credit to Salaries Expense
Explanation: Accrued salaries represent salaries that have been earned by
employees but not yet paid. The adjusting entry records the expense (debit
Salaries Expense) and the liability (credit Salaries Payable).
7. The closing entry for revenue accounts includes:
A) A debit to each revenue account and a credit to Income Summary
B) A debit to Income Summary and a credit to each revenue account
C) A debit to each revenue account and a credit to Retained Earnings
D) A debit to Retained Earnings and a credit to each revenue account
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Explanation: To close revenue accounts, each revenue account is debited for its
balance, and Income Summary is credited for the total. This transfers the
revenue balances to the Income Summary account.
8. Which of the following is a normal balance for a contra-asset account?
A) Debit
B) Credit
C) Either debit or credit
D) Neither
Explanation: Contra-asset accounts (such as Accumulated Depreciation and
Allowance for Doubtful Accounts) have a normal credit balance, which reduces
the carrying amount of the related asset account.
9. The matching principle requires that:
A) Expenses be recognized in the same period as the revenues they helped
generate
B) Expenses be recognized when cash is paid
C) Revenues be recognized when cash is received
D) All expenses be recognized immediately
Explanation: The matching principle requires that expenses be matched with
the revenues they help generate in the same accounting period, regardless of
when cash is exchanged. This is a cornerstone of accrual accounting.
10. Which financial statement reports a company's financial position at a
specific point in time?
A) Income Statement
B) Statement of Cash Flows
ACCT 6301 FINANCIAL ACCOUNTING COMPREHENSIVE
GRADUATE-LEVEL EXAMINATION 2026
FULL PACKAGE STUDY GUIDE
Instructions: Select the single best answer for each question. This examination covers the
fundamental principles, concepts, and applications of financial accounting at the graduate level,
including the accounting cycle, financial statement preparation and analysis, revenue recognition,
asset valuation, liabilities, equity, and statement of cash flows.
Section 1: Conceptual Framework & Accounting Cycle (Questions 1–15)
1. The primary objective of financial reporting is to:
A) Maximize shareholder wealth
B) Provide information useful for making investment and credit decisions
C) Minimize the company's tax liability
D) Ensure the company remains profitable
Explanation: According to the FASB Conceptual Framework, the primary
objective of financial reporting is to provide financial information about the
reporting entity that is useful to existing and potential investors, lenders, and
other creditors in making decisions about providing resources to the entity.
2. Which of the following is NOT a fundamental qualitative characteristic of
useful financial information?
A) Relevance
B) Conservatism
,2
C) Faithful representation
D) Materiality
Explanation: The fundamental qualitative characteristics are relevance and
faithful representation. Conservatism is a convention, not a fundamental
qualitative characteristic. Enhancing qualitative characteristics include
comparability, verifiability, timeliness, and understandability.
3. Under accrual accounting, revenues are recognized when:
A) Cash is received
B) Earned, regardless of when cash is received
C) The customer places an order
D) The invoice is sent to the customer
Explanation: Under accrual accounting, revenue is recognized when it is
earned—typically when goods are transferred or services are performed—not
necessarily when cash is received. This is the foundation of the revenue
recognition principle.
4. Which of the following accounts is considered a "permanent" (real)
account?
A) Revenue
B) Cash
C) Dividends
D) Expenses
Explanation: Permanent (real) accounts—assets, liabilities, and equity—carry
their balances forward from one accounting period to the next. Temporary
(nominal) accounts—revenues, expenses, and dividends—are closed to retained
earnings at the end of each period.
,3
5. A company purchases equipment for $50,000, paying $10,000 cash and
signing a note payable for the remainder. The journal entry should include a:
A) **Debit to Equipment $50,000; Credit to Cash $10,000; Credit to Notes
Payable $40,000**
B) Debit to Equipment $50,000; Credit to Cash $50,000
C) Debit to Equipment $10,000; Debit to Notes Payable $40,000; Credit to Cash
$50,000
D) Debit to Equipment $50,000; Credit to Cash $10,000; Credit to Accounts
Payable $40,000
Explanation: The equipment account is debited for the full cost of the asset
acquired. Cash is credited for the amount paid, and a liability (notes payable) is
credited for the amount financed.
6. The adjusting entry to record accrued salaries at year-end includes:
A) A debit to Salaries Payable and a credit to Cash
B) A debit to Salaries Expense and a credit to Salaries Payable
C) A debit to Salaries Expense and a credit to Cash
D) A debit to Salaries Payable and a credit to Salaries Expense
Explanation: Accrued salaries represent salaries that have been earned by
employees but not yet paid. The adjusting entry records the expense (debit
Salaries Expense) and the liability (credit Salaries Payable).
7. The closing entry for revenue accounts includes:
A) A debit to each revenue account and a credit to Income Summary
B) A debit to Income Summary and a credit to each revenue account
C) A debit to each revenue account and a credit to Retained Earnings
D) A debit to Retained Earnings and a credit to each revenue account
, 4
Explanation: To close revenue accounts, each revenue account is debited for its
balance, and Income Summary is credited for the total. This transfers the
revenue balances to the Income Summary account.
8. Which of the following is a normal balance for a contra-asset account?
A) Debit
B) Credit
C) Either debit or credit
D) Neither
Explanation: Contra-asset accounts (such as Accumulated Depreciation and
Allowance for Doubtful Accounts) have a normal credit balance, which reduces
the carrying amount of the related asset account.
9. The matching principle requires that:
A) Expenses be recognized in the same period as the revenues they helped
generate
B) Expenses be recognized when cash is paid
C) Revenues be recognized when cash is received
D) All expenses be recognized immediately
Explanation: The matching principle requires that expenses be matched with
the revenues they help generate in the same accounting period, regardless of
when cash is exchanged. This is a cornerstone of accrual accounting.
10. Which financial statement reports a company's financial position at a
specific point in time?
A) Income Statement
B) Statement of Cash Flows
