CPA EXAM NOTES – 100 REVISION QUESTIONS & ANSWERS
Accounting Framework
1. What is accounting?
Answer: The process of identifying, recording, classifying, summarizing, and communicating
financial information.
2. What is the primary objective of financial reporting?
Answer: To provide useful information for economic decision-making.
3. What are the qualitative characteristics of useful financial information?
Answer: Relevance, faithful representation, comparability, verifiability, timeliness, and
understandability.
4. What is the accounting equation?
Answer: Assets = Liabilities + Equity.
5. What is an asset?
Answer: A resource controlled by an entity expected to provide future economic benefits.
6. What is a liability?
Answer: A present obligation resulting in future outflows of economic resources.
7. What is equity?
Answer: The residual interest after liabilities are deducted from assets.
8. What is the accrual basis of accounting?
Answer: Transactions are recognized when they occur, not when cash is received or paid.
9. What is the going concern assumption?
Answer: The assumption that a business will continue operating for the foreseeable future.
10. What is materiality?
Answer: Information is material if it influences users’ decisions.
, Double Entry System
11. What is a debit?
Answer: The left side of an account.
12. What is a credit?
Answer: The right side of an account.
13. Which accounts increase with debits?
Answer: Assets and expenses.
14. Which accounts increase with credits?
Answer: Liabilities, equity, and revenue.
15. What is a journal?
Answer: The book of original entry.
16. What is a ledger?
Answer: The book containing all accounts.
17. What is posting?
Answer: Transferring journal entries to ledger accounts.
18. What is a trial balance?
Answer: A list of account balances used to verify equality of debits and credits.
19. Why is a trial balance prepared?
Answer: To detect arithmetic errors and assist in financial statement preparation.
20. What is a suspense account?
Answer: A temporary account used to hold unexplained differences.
Accounting Framework
1. What is accounting?
Answer: The process of identifying, recording, classifying, summarizing, and communicating
financial information.
2. What is the primary objective of financial reporting?
Answer: To provide useful information for economic decision-making.
3. What are the qualitative characteristics of useful financial information?
Answer: Relevance, faithful representation, comparability, verifiability, timeliness, and
understandability.
4. What is the accounting equation?
Answer: Assets = Liabilities + Equity.
5. What is an asset?
Answer: A resource controlled by an entity expected to provide future economic benefits.
6. What is a liability?
Answer: A present obligation resulting in future outflows of economic resources.
7. What is equity?
Answer: The residual interest after liabilities are deducted from assets.
8. What is the accrual basis of accounting?
Answer: Transactions are recognized when they occur, not when cash is received or paid.
9. What is the going concern assumption?
Answer: The assumption that a business will continue operating for the foreseeable future.
10. What is materiality?
Answer: Information is material if it influences users’ decisions.
, Double Entry System
11. What is a debit?
Answer: The left side of an account.
12. What is a credit?
Answer: The right side of an account.
13. Which accounts increase with debits?
Answer: Assets and expenses.
14. Which accounts increase with credits?
Answer: Liabilities, equity, and revenue.
15. What is a journal?
Answer: The book of original entry.
16. What is a ledger?
Answer: The book containing all accounts.
17. What is posting?
Answer: Transferring journal entries to ledger accounts.
18. What is a trial balance?
Answer: A list of account balances used to verify equality of debits and credits.
19. Why is a trial balance prepared?
Answer: To detect arithmetic errors and assist in financial statement preparation.
20. What is a suspense account?
Answer: A temporary account used to hold unexplained differences.
