Free CIA Financial Accounting Questions and Answers

Question 1

What is the fundamental accounting equation?

Accepted Answer

Assets = Liabilities + Equity

Answer

Assets = Revenue − Expenses

Answer

Assets + Liabilities = Equity

Answer

Assets − Equity = Liabilities

Question 2

Which financial statement reports revenues and expenses over a period?

Accepted Answer

Income Statement

Answer

Balance Sheet

Answer

Statement of Cash Flows

Answer

Statement of Retained Earnings

Question 3

Under accrual accounting, when are revenues recognized?

Accepted Answer

When goods are shipped or services rendered

Answer

When cash is received

Answer

When the related expense is paid

Answer

At the end of the fiscal year

Question 4

Which depreciation method allocates an asset’s cost evenly over its useful life?

Accepted Answer

Straight‑Line

Answer

Declining Balance

Answer

Units of Production

Answer

Sum‑of‑the‑Years’‑Digits

Question 5

What is the purpose of a trial balance?

Accepted Answer

To ensure debits equal credits

Answer

To reconcile bank accounts

Answer

To record adjusting entries

Answer

To compute net income

Question 6

Which account type has a normal credit balance?

Accepted Answer

Liability

Answer

Asset

Answer

Expense

Answer

Dividend

Question 7

What is a closing entry?

Accepted Answer

Transferring temporary account balances

Answer

Adjusting an asset’s book value

Answer

Recording an accrued expense

Answer

Opening a new ledger account

Question 8

Which internal control involves separating duties to reduce errors and fraud?

Accepted Answer

Segregation of Duties

Answer

Physical Controls

Answer

Reconciliations

Answer

Authorization Procedures

Question 9

Which inventory costing method assumes the first goods purchased are the first sold?

Accepted Answer

FIFO

Answer

LIFO

Answer

Weighted Average

Answer

Specific Identification