CPB / BookKeeping Financial Statement Preparation 5

Question 1

Which principle requires that expenses be recorded in the same period as the revenues they help generate?

Accepted Answer

Matching principle

Answer

The matching principle requires expenses to be recognized in the same accounting period as the revenues they helped produce.

Question 2

A company with $80,000 in current assets and $50,000 in current liabilities has working capital of:

Accepted Answer

$30,000

Answer

Working capital equals current assets minus current liabilities: $80,000 − $50,000 = $30,000.

Question 3

Which of the following would cause a timing difference between book income and taxable income?

Accepted Answer

Using straight-line depreciation for books and MACRS for taxes

Answer

Using different depreciation methods for financial reporting versus tax purposes creates temporary differences that lead to deferred tax assets or liabilities.

Question 4

Which type of audit opinion indicates that financial statements are presented fairly in all material respects?

Accepted Answer

Unmodified (clean) opinion

Answer

An unmodified (clean) opinion is issued when the auditor concludes the financial statements are presented fairly in all material respects under the applicable framework.

Question 5

On the statement of cash flows, proceeds from issuing long-term bonds are reported under:

Accepted Answer

Financing activities

Answer

Proceeds from issuing long-term debt are classified as financing activities because they relate to raising capital from creditors.

CPB / BookKeeping Practice Test

CPB / BookKeeping Practice Test

CPB / BookKeeping Financial Statement Preparation 5