CPA Exam Review questions and answers
Managerial Accounting deals with accounting, while Financial Accounting deals with .
Correct Answer: Internal; External
True or False:
Managerial accounting must follow GAAP. Correct Answer: 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 Answer: Going Concern
The assumption that a company's business cycle can be broken into periods (i.e. one year, one quarter,
etc.) Correct Answer: Periodicity
Accounting is reported as units of currency (i.e. dollars and cents); not indexed for inflation Correct
Answer: Monetary Unit
An accounting principle that allows the accountant to keep business separate from personal (excludes
legal) Correct Answer: Economic Entity
What is the general rule for capitalization of Research & Development costs? Correct Answer: You can't
capitalize R&D
True or False:
You accrue a contingency deemed to be reasonably possible Correct Answer: False: you accrue
contingencies deemed to be probable.
FASB ASC includes guidance for the . Correct Answer: SEC
Accounting information that enables comparing a company's reporting of one accounting period to
another. Correct Answer: Consistency
Principle that requires companies to match expenses with related revenues Correct Answer: Matching
What the company actually does vs. what the company says it does. Correct Answer: Substance over
form
FASB conceptual framework says that for financial reporting to be useful it must . Correct
Answer: Provide information useful for making business and investment decisions.
Materiality and Relevance are both defined by: Correct Answer: What influences or makes a difference
to a decision maker
Managerial Accounting deals with accounting, while Financial Accounting deals with .
Correct Answer: Internal; External
True or False:
Managerial accounting must follow GAAP. Correct Answer: 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 Answer: Going Concern
The assumption that a company's business cycle can be broken into periods (i.e. one year, one quarter,
etc.) Correct Answer: Periodicity
Accounting is reported as units of currency (i.e. dollars and cents); not indexed for inflation Correct
Answer: Monetary Unit
An accounting principle that allows the accountant to keep business separate from personal (excludes
legal) Correct Answer: Economic Entity
What is the general rule for capitalization of Research & Development costs? Correct Answer: You can't
capitalize R&D
True or False:
You accrue a contingency deemed to be reasonably possible Correct Answer: False: you accrue
contingencies deemed to be probable.
FASB ASC includes guidance for the . Correct Answer: SEC
Accounting information that enables comparing a company's reporting of one accounting period to
another. Correct Answer: Consistency
Principle that requires companies to match expenses with related revenues Correct Answer: Matching
What the company actually does vs. what the company says it does. Correct Answer: Substance over
form
FASB conceptual framework says that for financial reporting to be useful it must . Correct
Answer: Provide information useful for making business and investment decisions.
Materiality and Relevance are both defined by: Correct Answer: What influences or makes a difference
to a decision maker
