CLEP Financial Accounting Exam Practice Test | Practice Test / Quiz / MCQs

Classes | Practice Tests / Quizzes | User Guide | Life Manuals

28.5K quizzes covering K–12, CBSE, SAT, ACT, GRE, UPSC, SSC, Banking, Reasoning & more.

Accounting
| Take A Quiz

Home > Accounting > Quizzes > CLEP Financial Accounting Exam Practice Test

CLEP Financial Accounting Exam Practice Test

Fast practice, instant feedback. Timer auto-submits when time’s up.

Avg score: 37% • Most missed: “During 20x1, a business borrowed $10,000, paid back $2,000 of the loan with an a…”

Exam content for CLEP Financial Accounting exam, which covers the basics of introductory financial accounting course: General Topics (20%–30%) Generally accepted accounting principles Rules of double-entry accounting/transaction analysis/accounting equation The accounting cycle Business ethics Purpose of, presentation of, and relationships between financial statements Forms of business The Income Statement (20%–30%) Presentation format issues Recognition of revenue and expenses Cost of goods sold Irregular items (e.g., discontinued operations, extraordinary items,... Show more

Exam content for CLEP Financial Accounting exam, which covers the basics of introductory financial accounting course:

General Topics (20%–30%)
Generally accepted accounting principles
Rules of double-entry accounting/transaction analysis/accounting equation
The accounting cycle
Business ethics
Purpose of, presentation of, and relationships between financial statements
Forms of business

The Income Statement (20%–30%)
Presentation format issues
Recognition of revenue and expenses
Cost of goods sold
Irregular items (e.g., discontinued operations, extraordinary items, etc.)
Profitability analysis

The Balance Sheet (30%–40%)
Cash and internal controls
Valuation of accounts and notes receivable (including bad debts)
Valuation of inventories
Acquisition and disposal of long-term assets
Depreciation/amortization/depletion
Intangible assets (e.g., patents, goodwill, etc.)
Accounts and notes payable
Long-term liabilities (e.g., bonds payable)
Owner's equity
Preferred and common stock
Retained earnings
Liquidity, solvency, and activity analysis

Statement of Cash Flows (5%–10%)
Indirect method
Cash flow analysis
Operating, financing, and investing activities

Miscellaneous (Less than 5%)
Investments
Contingent liabilities

Show less

CLEP Financial Accounting Exam Practice Test

Time left 00:00

1. In X-Corp’s chart of accounts is a single account called “accounts receivable” and another called “allowance for uncollectible accounts.” From this information alone, which statement below is TRUE?

X-Corp uses accrual accounting and the direct write-off method.X-Corp has only one customer that owes money.X-Corp uses accrual accounting and does not use the direct write-off method.X-Corp is a cash-basis taxpayer.X-Corp records sales revenues when it receives the money.

2. A grocery store buys lettuce every three days. Each day it puts the older lettuce in the front and the newer lettuce in the back, hoping that buyers will take the older lettuce first. Which inventory method does GAAP require this grocery store to use?

Weighted averageSpecific unitFirst-in, first-outThe grocery store may select any accurate inventory method.Last-in, first-out

3. The method for calculating depletion for a natural resource is most similar to which depreciation method?

Units of production methodTax methodMACRS methodStraight-line methodDouble declining balance method

4. Company A set up a petty cash fund initially with a $200 debit to petty cash and a $200 credit to cash. When will Company A debit the petty cash account next?

Whenever the petty cash fund is replenishedWhen the petty cash fund runs out of moneyWhen Company A wants to increase the amount in the petty cash fundAfter a surprise inspection at a random timeAt the end of the month

5. On the books, you see an account called “unrealized gain/loss on marketable securities.” In the account is a single transaction showing a $3,000 debit. Which statement could be TRUE?

Short-term investments in marketable securities have gone up $3,000, but the securities have not been sold.The business sold its investments in marketable securities for a $3,000 gain.Short-term investments in stock went down $3,000, but the stock was not sold.Short-term investments in bonds were sold for a $3,000 loss.The business sold equipment for a loss of $3,000.

6. Company A bought $5,000 of stock for a short-term investment. Two months later, it sold the stock for $6,000. The journal entry to record the sale includes

a $1,000 debit to realized gain/loss on sale of marketable securitiesa $6,000 credit to realized gain on sale of short-term investmentsa credit to short-term investments for $5,000a credit to cash for $6,000a $1,000 credit to unrealized gain on sale of short-term investments

7. The general journal entry to record a loan payment of $670, of which $70 is interest expense, includes

a credit to interest expensea debit to income summarya debit to casha credit to owner’s equitya debit to loans payable

8. MegaCorp is a large retailer. Which item below would you NOT expect to find on MegaCorp’s depreciation schedule?

Depreciation for a $100 electric drill with a useful life of 3 yearsThe date of purchase for all assets on the scheduleDepreciation for a $1,000,000 building over its 40-year lifeA column for the depreciation for each asset for the current yearA column identifying the depreciation method used for each asset

9. Depreciation expense

for an asset happens the year that asset is purchasedrepresents the cash spent this period for asset upkeepmeasures the amount of asset appreciation during a yearfor an asset happens the year that asset is soldestimates the amount of the asset used up during the year

10. Which of the following would NOT appear on a statement of stockholders’ equity?

New issuances of preferred stockForeign currency adjustmentsCash from the sale of land held for investmentUnrealized gains on hold-to-maturity investmentsPurchases of treasury stock

11. Which of the following is NOT part of a general journal entry?

The current balance of the affected accountsAn explanation, commonly placed inside parenthesesA credit entry with a number in the credit columnThe date of the entryA debit entry with a number in the debit column

12. Company A is only six months old. Which of the following is NOT part of any general ledger account on the second-to-last day of the year?

The source of the informationThe date of the transactionAn account number and/or an account nameA closing entry bringing the account balance to zeroAll the increases and decreases in the account

13. Where does one find the information to create a cash flow statement?

The amounts in the cash flow statement accountsOn a special worksheet showing the changes in balance sheet accountsThe amounts in the balance sheet accountsOn a special worksheet showing the increase in the income statement accounts for the yearThe balances in the income and expense accounts

14. Farmer Brown bought an $11,000 tractor on April 10, 20x1. He estimated a $1,000 salvage value and a useful life of five years. He selected the straight-line method. In 20x1 he correctly reported $1,500 of depreciation on this tractor. Which depreciation convention did Farmer Brown select?

Mid-yearMid-monthNearest monthNearest yearBeginning of year

15. Who is/are LEAST likely to see your sole proprietorship financial statements?

Your business bankerYour business partnersPotential investorsYour employeesThe Internal Revenue Service

16. X-Corp immediately discounted ABC Co.’s $10,000 non-interest-bearing 1-month note for $9,900. One month later, ABC Co. defaulted. The bank billed X-Corp $10,100, charging a $100 dishonored note fee. Which of the following is part of the journal entry on X-Corp’s books as a result of the default?

Credit accounts payable $10,100Debit note receivable $10,000; debit interest receivable $100Debit dishonored note expense $100X-Corp does not owe the bank the $10,100. The bank must collect from ABC Co.Debit accounts receivable $10,100

17. When a business owner writes a check from the business checking account to pay for personal groceries, the proper journal entry will include

a credit to an income accounta debit to the groceries expense accounta debit to the withdrawal accounta debit to the cash accounta credit to the owner’s equity account

18. Jones & Jones issued $100,000 of 6% bonds at a price of $95. The bond issuance cost was $3,000. Which of the following is part of the journal entry to record these bonds on Jones & Jones books?

Credit bonds payable $95,000Credit bond issuance expense $3,000Debit cash $92,000Debit interest expense $6,000Credit premium on bonds payable $5,000

19. X-Corp has a June 30 fiscal year and keeps its books according to GAAP. It paid $1,200 for a year’s worth of insurance on June 1, 20x1. X-Corp makes all the correct journal entries. Considering only these events, which statement below is completely TRUE as of June 30, 20x1?

X-Corp will have $100 additional insurance expense and $1,100 additional prepaid insurance.X-Corp will have $1,100 additional insurance expense and $100 prepaid insurance.X-Corp will have $100 additional insurance expense and $1,100 additional insurance payable.X-Corp will have $1,200 additional insurance expense.X-Corp will have $1,200 additional prepaid insurance.

20. A professional self-employed violinist sold his violin for $100,000. He bought it 40 years ago for $10,000 and depreciated it over 30 years with a zero salvage value. Which is part of the journal entry to record the sale?

Debit violin account $10,000Credit gain on sale of violin $90,000Debit cash $90,000Debit gain on sale of violin $100,000Debit accumulated depreciation $10,000

21. Which is the best reason for creating a cash flow statement?

Net income reflects cash received from operations.The balance sheet does not contain information useful in determining what has happened to cash.Owners need to know how much money they can safely take out of the business.Bankers want to see how quickly business assets depreciate.It is the easiest financial statement to create.

22. Mr. Clark incorporated his sole proprietorship. He contributed $5,000 of cash in addition to equipment with a historical cost of $16,000 and accumulated depreciation of $4,000. In exchange for these assets, Mr. Clark gets 100 shares of $10 par common stock. Which of the following is part of the journal entry to record this transaction on the corporate books?

Credit common stock $1,000Debit equipment $12,000Debit accumulated depreciation $4,000Credit additional paid-in capital in excess of par $24,000Credit cash $5,000

23. At the end of 20x1, ABC Co. owed $5,000 of wages to employees who were not paid until January 5, 20x2. ABC maintains its accounting books according to GAAP. Which statement below is TRUE?

ABC should credit wages payable $5,000 on December 31, 20x1.ABC should debit wages expense $5,000 on January 5, 20x2.ABC makes no entry until it pays the wages on January 5.ABC should accrue cash out on December 31, 20x1.ABC should credit wages payable $5,000 on January 5, 20x2.

24. Company A bought a building in 20x1 for $1,000,000. In 20x3, because of an unusual increase in the population, the demand for real estate increased the value of the building to $1,200,000. Depreciation expense for the building since it was purchased totals $50,000. What is the balance in the building account, and why?

$1,150,000, for the same reason above, with a reduction for depreciation expense.$1,000,000 because the Stable Monetary Unit Principle does not permit restating the building for inflation.$1,000,000 because the Historical Cost Principle prevents Company A from showing the building at its current fair value.$950,000 because several accounting principles prohibit recognizing the increase in value, but depreciation reduces the building account.$1,200,000 because the Going-concern Principle requires showing assets at their current fair values.

25. Bill mistakenly charged Jill $100 too much for plumbing services. When Bill returns the money to Jill, Bill will most probably correct his books by debiting

the withdrawal accountthe plumbing income accountthe overcharges contra-sales accountthe mistakes expense accountthe cash account

Welcome to Fatskills

Join 4M+ learners. Unlock unlimited quizzes, wrong-answer tracking, flashcards + reminders, study guides, and 1-on-1 challenges.

Create a free account Sign in

900+ exams • Millions of questions • No spam

❤ If you liked Fatskills, consider supporting us by checking out The Life Manuals You Never Got.

🌈 Our mission is to help improve your scores in any subject and exam withonline quizzes, practice tests, study guides, & advice for students. Since 2018.

About | Explore | User Guide | Topics | Subjects | Doubt Solver | Career Aptitude Test | Answers | Free Tools | OSHA Basics Quiz | What Should We Know?
Privacy | Terms |

All trademarks, logos and brand names are the property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, trademarks and brands does not imply endorsement.

25 Questions

❤ If you liked Fatskills, consider supporting us by checking out The Life Manuals You Never Got.

About | Explore | User Guide | Topics | Subjects | Doubt Solver | Career Aptitude Test | Answers | Free Tools | OSHA Basics Quiz | What Should We Know?
Privacy | Terms |

Without work one finishes nothing. - Ralph Waldo Emerson
© 2026 Fatskills.com

All trademarks, logos and brand names are the property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, trademarks and brands does not imply endorsement.

25 Questions

❤ If you liked Fatskills, consider supporting us by checking out The Life Manuals You Never Got.

About | Explore | User Guide | Topics | Subjects | Doubt Solver | Career Aptitude Test | Answers | Free Tools | OSHA Basics Quiz | What Should We Know? Privacy | Terms |

Without work one finishes nothing. - Ralph Waldo Emerson© 2026 Fatskills.com

All trademarks, logos and brand names are the property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, trademarks and brands does not imply endorsement.

About | Explore | User Guide | Topics | Subjects | Doubt Solver | Career Aptitude Test | Answers | Free Tools | OSHA Basics Quiz | What Should We Know?
Privacy | Terms |

Without work one finishes nothing. - Ralph Waldo Emerson
© 2026 Fatskills.com