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Accounting Test

Assess your knowledge on accounting principles and concepts

Written by CFI Team

Updated March 14, 2023

Accounting Test

This Accounting Test is designed to help you assess your knowledge of essential accounting principles and basic concepts. We strongly encourage any students who are planning or are beginning their FMVA certification program to take this test to determine whether you will need to take the prerequisite accounting courses including Accounting Fundamentals and Reading Financial Statements. This is also a useful resource for employers to examine the technical knowledge of the candidates during an accounting or finance interview.

If you pass this accounting test with 80% or above (16 questions or more), it is likely that you have strong accounting knowledge and are good to go ahead with our core courses!

Accounting Test T Accounts

Accounting Test Questions

1. The Statement of Profit and Loss is also called the*
- Balance Sheet
- Income Statement
- Statement of Cash Flows
- Statement of Financial Position
2. Which of the following is not a type of cash flows shown in the Cash Flow Statement?*
- Operating cash flow
- Investing cash flow
- Accounting cash flow
- Financing cash flow
3. Which of the following is not a current asset?*
- Cash
- Accounts receivable
- Inventory
- Property, plant, and equipment
4. What are the effects on the balance sheet when a company borrows a two-year bank loan of $1,000?*
- $1,000 credit in current liabilities; $1,000 debit in current assets
- $1,000 credit in current liabilities; $1,000 debit in non-current assets
- $1,000 credit in non-current liabilities; $1,000 debit in current assets
- $1,000 credit in non-current liabilities; $1,000 debit in non-current assets
5. What happens to the balance sheet when a company makes sales of $500, of which $300 is paid in cash and $200 is sold on credit?*
- $300 debit in cash; $200 debit in accounts receivable; $500 credit in retained earnings
- $300 credit in cash; $200 credit in accounts receivable; $500 debit in retained earnings
- $300 debit in cash; $200 debit in accounts payable; $500 credit in retained earnings
- $300 credit in cash; $200 credit in accounts payable; $500 debit in retained earnings
6. What happens to the balance sheet when a company pays salaries of $5,000?*
- $5,000 credit in cash; $5,000 debit in accounts payable
- $5,000 credit in cash; $5,000 debit in retained earnings
- $5,000 debit in cash; $5,000 credit in retained earnings
- $5,000 credit in cash; $5,000 debit in accounts receivable
7. Which of the following is the correct formula to calculate operating income?*
- Operating income = Revenue - Direct operating cost
- Operating income = Revenue - Indirect operating cost
- Operating income = Gross profit - Direct operating cost
- Operating income = Gross profit - Indirect operating cost
8. Given the following Balance Sheet extract, calculate the net profit on the Income Statement. (Assuming tax rate = 10% of operating profit)*
- 37
- 25
- 21
- 33
9. Company A used $3,000 worth of office supplies this year but the costs were not paid for until next year. Which of the following is not a result of this transaction?*
- An expense of $3,000 is recorded on this year's income statement
- There is a $3,000 credit in cash on the balance sheet
- An accrued expense of $3,000 is recorded as current liabilities on the balance sheet
- There is a $3,000 credit in office supplies on the balance sheet
10. Company B purchased an equipment for $600. The equipment has a useful life of 4 years and a scrap value of $50 at the end of year 4. What is the depreciation expense for year 1 (using straight line method)?*
- $137.5
- $150.0
- $50.0
- $122.5
11. Using the same example from question 10, what is the closing balance of property, plant & equipment (PP&E) in year 3?*
- $150.0
- $325.0
- $187.5
- $50.0
12. Which of the following is not an example of financing cash flow?*
- Issuing $10M worth of shares
- Repaying $50,000 of long-term debt
- Paying $200,000 of dividends to shareholders
- Investing $60,000 in equipment
13. Which of the following is true about the accrual concept?*
- It requires companies to recognize revenues and costs as the business receives or pays the actual cash for them
- It requires companies to recognize revenues and costs as the business incurs them
- The cash flow statement records transactions when the business incurs them
- Profits on the income statement equals the closing cash flow on the cash flow statement
14. Which of the following best describes the Double Declining Balance depreciation method?*
- An equal amount of depreciation is applied every year for the assets' useful life
- The depreciation expense is based on the output that the assets produce
- This method is useful when a company wants to match the actual output of the business to the depreciation expense that it incurs
- The depreciation expense is greater in the first few years and smaller in the later years
15. What is the formula to calculate operating cash flows with the indirect method of creating a cash flow statement?*
- Net income + Depreciation - Changes in working capital
- Net income - Depreciation + Changes in working capital
- Net income - Depreciation + Cash
- Net income + Cash - Changes in working capital
16. Given the following information, calculate the operating cash flows.*
- 9
- 21
- 73
- 13
17. Net capital expenditure (net CapEx) should be recorded in which section of a Cash Flow Statement?*
- Financing cash flow
- Operating cash flow
- Depreciation cash flow
- Investing cash flow
18. The ending net book value of Property, Plant & Equipment (PP&E) in year 1 and year 2 are $500,000 and $430,000 respectively on Company A's balance sheet. The company's depreciation expense in year 2 is $90,000. What is Company A's net capital expenditure?*
- 160,000
- 90,000
- 20,000
- 340,000
19. Which of the following is the correct formula for calculating retained earnings?*
- Earnings Before Interest & Taxes - Dividends
- Earnings Before Taxes - Dividends
- Net Income - Dividends
- Operating Income - Dividends
20. In which sections of a Cash Flow Statement should net income and dividends be recorded?*
- Net Income - Operating Cash Flow; Dividends - Financing Cash Flow
- Net Income - Operating Cash Flow; Dividends - Investing Cash Flow
- Net Income - Financing Cash Flow; Dividends - Investing Cash Flow
- Net Income - Financing Cash Flow; Dividends - Operating Cash Flow
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