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CFI FMVA Final Exam Questions and
Correct Answers (100% Verified) |
Updated Review 2026/2027 | Already
Rated A+
MULTIPLE CHOICES
1. Income statement accounting is based on which method?
A) Cash basis
B) Accrual basis
C) Tax basis
D) Managerial basis
Answer: B
Revenues and costs are recorded as a business earns or incurs them, not as cash is received or paid, matching them
to the relevant period .
2. Why are profits and cash flow not the same thing?
A) Cash flow includes non-cash expenses
B) Accounting differences due to accrual accounting
C) Profits are always higher
D) Cash flow ignores revenues
Answer: B
Timing differences between revenue recognition and cash collection, plus non-cash expenses like depreciation,
create variance .
3. Cash accounting method records transactions:
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A) When invoices are sent
B) When goods are delivered
C) At the time money changes hands
D) At year-end closing
Answer: C
Income and expenditures are recorded only when cash is physically received or paid out .
4. Accrual Basis Accounting means:
A) Recording only cash transactions
B) Reporting income when earned and expenses when incurred
C) Delaying expense recognition
D) Using cash flow statements only
Answer: B
This method matches revenues to the period earned and expenses to the period incurred, regardless of cash timing .
5. Where does a sale get recorded regardless of cash collection?
A) Cash flow statement only
B) Income statement
C) Balance sheet only
D) Statement of equity
Answer: B
The income statement records all revenues earned, whether cash is received or accrued .
6. How do you decide when a sale happens under accrual accounting?
A) When cash is received
B) When contract is signed
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C) Recognize revenue upon delivery of good or service performed
D) At end of fiscal year
Answer: C
Revenue is recognized when the performance obligation is satisfied and control transfers to customer .
7. Accrued expenses are:
A) Paid in advance
B) Incurred in one fiscal period but not paid until a later period
C) Never recorded
D) Only cash expenses
Answer: B
Expenses incurred but not yet paid require an adjusting entry to record liability .
8. Prepaid expenses are classified as:
A) Current liability
B) Current asset
C) Long-term debt
D) Equity
Answer: B
Payments made in advance for future benefits represent an asset until consumed .
9. Unearned Revenue appears on the balance sheet as:
A) Asset
B) Current liability
C) Shareholder equity
D) Revenue
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Answer: B
Cash collected before service performance creates an obligation to deliver, recorded as a liability .
10. Deferred income taxes arise from:
A) Permanent differences only
B) Timing differences between accounting income and taxable income
C) Cash flow mismatches
D) Tax rate changes only
Answer: B
Temporary differences reverse in future periods, creating deferred tax assets or liabilities .
Financial Statements & Ratios
11. Working Capital is defined as:
A) Total assets minus total liabilities
B) Current assets minus current liabilities
C) Cash plus inventory
D) Net income plus depreciation
Answer: B
Working capital measures short-term liquidity and operational efficiency .
12. Which ratio determines profitability of goods sold by a company?
A) Net profit margin
B) Gross profit margin
C) Return on equity
D) Operating margin
Answer: B
4 SUCCESS!!!
CFI FMVA Final Exam Questions and
Correct Answers (100% Verified) |
Updated Review 2026/2027 | Already
Rated A+
MULTIPLE CHOICES
1. Income statement accounting is based on which method?
A) Cash basis
B) Accrual basis
C) Tax basis
D) Managerial basis
Answer: B
Revenues and costs are recorded as a business earns or incurs them, not as cash is received or paid, matching them
to the relevant period .
2. Why are profits and cash flow not the same thing?
A) Cash flow includes non-cash expenses
B) Accounting differences due to accrual accounting
C) Profits are always higher
D) Cash flow ignores revenues
Answer: B
Timing differences between revenue recognition and cash collection, plus non-cash expenses like depreciation,
create variance .
3. Cash accounting method records transactions:
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A) When invoices are sent
B) When goods are delivered
C) At the time money changes hands
D) At year-end closing
Answer: C
Income and expenditures are recorded only when cash is physically received or paid out .
4. Accrual Basis Accounting means:
A) Recording only cash transactions
B) Reporting income when earned and expenses when incurred
C) Delaying expense recognition
D) Using cash flow statements only
Answer: B
This method matches revenues to the period earned and expenses to the period incurred, regardless of cash timing .
5. Where does a sale get recorded regardless of cash collection?
A) Cash flow statement only
B) Income statement
C) Balance sheet only
D) Statement of equity
Answer: B
The income statement records all revenues earned, whether cash is received or accrued .
6. How do you decide when a sale happens under accrual accounting?
A) When cash is received
B) When contract is signed
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C) Recognize revenue upon delivery of good or service performed
D) At end of fiscal year
Answer: C
Revenue is recognized when the performance obligation is satisfied and control transfers to customer .
7. Accrued expenses are:
A) Paid in advance
B) Incurred in one fiscal period but not paid until a later period
C) Never recorded
D) Only cash expenses
Answer: B
Expenses incurred but not yet paid require an adjusting entry to record liability .
8. Prepaid expenses are classified as:
A) Current liability
B) Current asset
C) Long-term debt
D) Equity
Answer: B
Payments made in advance for future benefits represent an asset until consumed .
9. Unearned Revenue appears on the balance sheet as:
A) Asset
B) Current liability
C) Shareholder equity
D) Revenue
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Answer: B
Cash collected before service performance creates an obligation to deliver, recorded as a liability .
10. Deferred income taxes arise from:
A) Permanent differences only
B) Timing differences between accounting income and taxable income
C) Cash flow mismatches
D) Tax rate changes only
Answer: B
Temporary differences reverse in future periods, creating deferred tax assets or liabilities .
Financial Statements & Ratios
11. Working Capital is defined as:
A) Total assets minus total liabilities
B) Current assets minus current liabilities
C) Cash plus inventory
D) Net income plus depreciation
Answer: B
Working capital measures short-term liquidity and operational efficiency .
12. Which ratio determines profitability of goods sold by a company?
A) Net profit margin
B) Gross profit margin
C) Return on equity
D) Operating margin
Answer: B
4 SUCCESS!!!
