NAFTrack Accounting Practice Test

These questions are part of the practice quiz. Start practicing

• The chief accounting officer responsible for financial reporting and internal controls.
• Which organization protects investors and helps markets run smoothly?
• Which principle requires maintaining the same accounting methods across periods to ensure comparability?
• Which term describes a structured list of all accounts used by a business?
• Which choice correctly identifies the role described as analyzing financial data to guide investment decisions?
• Which statement best describes the role of a financial analyst?
• Which item is a regulatory body that oversees securities markets and financial reporting?
• Which statement best describes depreciation and the factors that determine its amount?
• A journal entry records a transaction with at least one debit and one credit; the sum of debits equals the sum of credits.
• Which formula correctly defines the Return on Sales ratio?
• When a cash dividend is declared and paid, which accounts are affected?
• Which structure combines partnership tax benefits with corporate limited liability?
• Regulatory agencies are government bodies that typically do what?
• Which professional analyzes financial data to spot trends and guide investment decisions?
• Which document summarizes all ledger accounts and their balances?
• What are the two primary methods for accounting for bad debts, and what are the basic effects?
• Vertical analysis expresses each income statement item as a percentage of what base?
• Under ASC 842, which lease classifications exist?
• Which of the following is an example of a liability?
• What is amortization and which assets use it?
• Which principle states that transactions should be recorded as if the company will continue in operation?
• Forensic accounting is typically used in which scenario?
• Which board protects investors and oversees audits of public companies?
• Which scenario favors cash basis accounting?
• What is variance analysis and how is it used in budgeting?
• Providing financial information to internal managers for decision-making.
• What is the relationship between Net Accounts Receivable and the Allowance for Doubtful Accounts?
• Which term is described as the professional who verifies financial records for accuracy and compliance?
• Which description describes SCOE?
• The evaluation of financial plans to manage spending and allocate resources.
• Which professional helps individuals and businesses manage wealth and investments?
• Which items are typically disclosed in notes to financial statements regarding income tax provisions?
• Income Statements are used to determine what?
• Correcting entries are used to do what in the accounting records?
• Which method identifies a transposition error in columnar calculations?
• Which statement best describes current liabilities?
• Which organization is a private, nonprofit entity that develops standards for GAAP?
• What is the effect of treasury stock on equity?
• What steps should be taken if errors persist after checking columnar calculations and postings?
• Segregation of duties in internal controls means what?
• What is the third step in the accounting cycle?
• What is a lease right-of-use asset and how is it recognized under ASC 842?
• Explain the difference between capitalizing and expensing a cost.
• What is a cost flow assumption and why does it matter for financial reporting?
• What is the treatment of abnormal waste in inventory costing?
• Which depreciation method is most appropriate for a machine whose wear is driven by production volume, compared with a nonproduction asset?
• Which element emphasizes documentation to support evaluation?
• In impairment testing for long-lived assets held for use, which statement about recoverable amount is correct?
• Which equation expresses the Current Ratio?
• How should a company account for asset retirement obligations related to long-term assets?
• If a contingent liability is only reasonably possible, what is required in financial reporting?
• Which of the following is a common red flag of fraud in accounting?
• An error where two adjacent digits are reversed.
• Which statement best describes accrual basis accounting?
• What is the effect of an adjusting entry that records accrued salaries earned but not yet paid?
• Which principle advises not to make statements look better than they are and to exercise caution with transactions?
• Analyzing and recording the costs associated with producing goods or services.
• Which statement correctly describes accrual accounting?
• Which term describes a business owned and run by a single individual?
• What is the purpose of adjusting entries at period end, and provide an example.
• Which statement is true regarding straight-line depreciation versus units-of-production depreciation?
• Which business form is a legal entity separate from its owners, providing limited liability to its shareholders?
• What is collateral in lending terms?
• An error from an incorrectly placed decimal point.
• What is the primary purpose of horizontal analysis?
• Which description best defines Vertical Analysis on an income statement?
• Which principle requires statements to be honest and accurate?
• Which principle requires the same accounting method to be used?
• IFRS stands for which set of standards?
• ISA stands for International Standards on Auditing; used to predict past performances and profitability and stability.
• Which principle of internal control helps prevent errors and fraud by separating key duties among different people?
• If the difference between two columns is divisible by 9, what type of error is it most consistent with?
• What is the sixth step in the accounting cycle?
• A note payable that matures in 18 months should be classified as which type of liability?
• What is the fourth step in the accounting cycle?
• Which professional would you consult for comprehensive wealth management and investment planning?
• Which entry correctly records a sales return and an estimate for expected returns?
• Which accounting principle is associated with the phrase 'analysis of composition' in the source?
• How is interest on debt recognized under accrual accounting?
• Bank reconciliations help detect irregularities by comparing bank statements with which records?
• Documentation provides which concept?
• Documentation is best described as which of the following?
• Which set correctly describes the three sections of a cash flow statement and what each shows?
• GAAP stands for which of the following?
• Which organization is primarily responsible for setting accounting standards in the United States for GAAP?
• What is a trade receivable aging schedule used for?
• Which statement expresses the basic accounting equation and how debits and credits affect its components?
• Which statement correctly describes the use of correcting entries?
• Which inventory system requires continuous tracking of inventory and COGS with each sale or purchase?
• Which items are included in current assets when calculating net working capital?
• Which principle ensures consistency by applying the same principles as always?
• What is the seventh step in the accounting cycle?
• What does the Principle of Consistency require?
• In a journal entry for accrued salaries at period end, which accounts are typically affected?
• Which accounting method is typically used for accounts payable and accounts receivable and records transactions when the transaction occurs?
• Cash Accounting records transactions when?
• Where is the post reference information located in the recording of transactions?
• If a cash dividend is declared but not yet paid, what effects would you expect on the accounts?
• How do periodic and perpetual inventory systems differ?
• Which statement about correcting entries is true?
• What is the primary use of a trade receivable aging schedule?
• Which term describes the book of original entry in accounting?
• Which statement is not a cash control practice?
• If a trial balance does not balance, which method is described for locating the error?
• Which organization creates and administers the CPA exam and audit standards, and develops behavioral guidelines?
• Which professional focuses on wealth management and investment strategy for clients?
• Under accrual accounting, when should a contingent liability be recognized?
• How do purchase discounts and purchase returns affect the cost of inventory?
• In a cost-volume-profit model, the contribution margin per unit is defined as:
• What is the fifth step in the accounting cycle?
• Which term is the process of analyzing and recording costs associated with producing goods or services?
• Regulatory agencies exist to protect investors and maintain fair markets by enforcing rules. Which option best summarizes this role?
• What controls are essential to safeguard financial data?
• What is the LCNRV concept and when is impairment recognized?
• If carrying amount exceeds recoverable amount, what is required?
• Which documents constitute an effective audit trail in financial records?
• What is the second step in the accounting cycle?
• In the accounting cycle, what is the first step?
• Which standards facilitate international comparability and are used by many non-US jurisdictions?
• Describe a high-level difference between GAAP and IFRS in inventory costing.
• What is the closing process in bookkeeping?
• Which statement correctly identifies LLC characteristics?
• How does a reversing entry simplify subsequent bookkeeping, and when is it commonly used?
• Which activity best illustrates independent verification in internal controls?
• Which of the following is a typical personnel policy element?
• Which of the following is a contra-asset account?
• What is a purchase price variance and what does its analysis aim to identify in standard costing?
• What is a standard cost system and how does it differ from actual costs?
• Which principle requires accounting to be reported in equal-length time periods?
• Explain the concept of present value and how it affects capital budgeting decisions.
• Which form of business is a legal entity separate from its owners, offering limited liability?
• What is a lease liability and how does it interact with a lease right-of-use asset on the balance sheet?
• Which term best describes the book of original entry in accounting?
• What is the break-even point and how is it calculated in a simple cost-volume-profit model?
• What is the purpose of a trial balance and what does it reveal?
• How is working capital defined?
• Which statement about the allowance for doubtful accounts is true?
• Which item would not typically be part of an audit trail?
• A professional who verifies the accuracy and compliance of financial records.
• What does a trial balance primarily demonstrate?
• Which is a core element of internal controls?
• Which statement correctly differentiates point-in-time versus over-time revenue recognition, with an example?
• Which term means documents presenting financial data that must be objective, consistent, and unbiased?
• Which form of business is owned and operated by two or more co-owners?
• What is the primary purpose of maintaining internal controls over cash receipts and payments?
• Documents used to record, organize, and report financial transactions.
• Which term focuses on providing detailed financial information for internal managers to aid decision-making?
• What does GJ stand for in accounting?
• What best describes treasury stock in corporate accounting?
• What is the purpose of capitalizing a cost?
• Which principle would most directly conflict with using different accounting methods from year to year without justification?
• Under ASC 606, what are the five steps to recognize revenue?
• Which of the following are key ethical considerations in accounting practice?
• Which role is primarily responsible for internal controls and accurate financial reporting?
• Which statement about FIFO, LIFO, and Weighted Average is true?
• What is a sales discount and when is it recognized?
• Which description best defines financial reports?
• Which organization collects taxes and has enforcement powers?
• In capital budgeting, a project is acceptable if its net present value is:
• Which term describes the evaluation of financial plans to manage spending and allocate resources?
• Which of the following entities enforces financial laws and standards to protect the public and markets?
• Net realizable value is defined as the estimated selling price less costs of completion and selling.
• What is the primary purpose of a resume?
• Which term describes the process of transferring temporary account balances to permanent capital accounts?
• Which bad debt method is generally more GAAP-compliant?
• Which of the following best represents the purpose of a resume?
• Under the allowance method, what effect does recording an allowance have on net accounts receivable?
• How is net working capital calculated and what does it indicate?
• Which transaction is typically reported in the financing activities section of the cash flow statement?
• Which organization oversees the audits of public companies to protect investors?
• What is the difference between accrued expenses and accounts payable?
• Which function best describes a financial advisor?
• Step-by-step evidence tracing a transaction from source document to financial statement.
• Which statement best describes the Return on Sales ratio?
• What is the purpose of segregation of duties in accounting controls?
• What is the purpose of closing entries and why are they necessary in accounting cycles?
• Which statement best describes Horizontal Analysis in financial evaluation?
• Which current ratio is commonly considered healthy?
• Which standards ease international financial reporting and are used by EU countries?