CPB / BookKeeping Financial Statement Preparation 2

Question 1

Which financial statement shows a company's revenues and expenses over a specific period?

Accepted Answer

Income statement

Answer

The income statement (profit and loss statement) reports revenues, expenses, and net income or loss over an accounting period.

Question 2

Under accrual accounting, when should revenue be recognized on a financial statement?

Accepted Answer

When goods or services are delivered

Answer

Under accrual accounting, revenue is recognized when goods or services are delivered to the customer, regardless of when cash is received.

Question 3

Which section of the statement of cash flows includes payments for equipment purchases?

Accepted Answer

Investing activities

Answer

Purchases of long-term assets like equipment are classified under investing activities on the statement of cash flows.

Question 4

What is the correct order for listing assets on a balance sheet under US GAAP?

Accepted Answer

Current assets first, then non-current assets

Answer

Under US GAAP, assets are listed in order of liquidity, with current assets (most liquid) appearing before non-current assets.

Question 5

Which of the following is classified as an operating activity on the statement of cash flows using the indirect method?

Accepted Answer

Depreciation expense added back to net income

Answer

Under the indirect method, depreciation—a non-cash expense—is added back to net income to arrive at cash from operations.

CPB / BookKeeping Practice Test