IAB Practice Test

Candidates seeking bookkeeping credentials through the Institute of Accountants and Bookkeepers take these qualifications to build practical accounting skills. This page provides free practice questions, assessment specifications, and passing requirements for the IAB Level 1 Award in Bookkeeping, IAB Level 2 Certificate in Bookkeeping, and IAB Level 3 Certificate in Bookkeeping and Accounting. Explore practice sets below to evaluate your knowledge across accounting principles, payroll, compliance, and reporting.

IAB Exam at a Glance

What changed for IAB in 2026

• Oct 27, 2026: Registration deadline (IAB Level 1 Award in Bookkeeping (601/9065/6)) changed to 1 March 2027 (previously Closes to new learners 1 March 2027).^[3]
• Oct 27, 2026: Registration deadline (IAB Level 2 Certificate in Bookkeeping (601/9061/9)) changed to 1 March 2027 (previously Closes to new learners 1 March 2027).^[4]
• Oct 27, 2026: Registration deadline (IAB Level 3 Certificate in Bookkeeping and Accounting (601/9058/9)) changed to 1 March 2027 (previously Closes to new learners 1 March 2027).^[5]

What the IAB is and how it works

According to Institute of Accountants and Bookkeepers, “At Level 1 you need at least 60% in each assessment.”^[1]

The Institute of Accountants and Bookkeepers offers qualifications designed to certify competence in bookkeeping and financial recording. Candidates can pursue the IAB Level 1 Award in Bookkeeping (601/9065/6), the IAB Level 2 Certificate in Bookkeeping (601/9061/9), or the IAB Level 3 Certificate in Bookkeeping and Accounting (601/9058/9). None of the three qualifications has formal entry requirements, though basic numeracy and literacy are recommended for Level 1, and bookkeeping knowledge is desirable for Level 2. UK Student Membership costs £125.

All three qualifications are delivered through E-assessment and graded Pass/Fail. Each level establishes specific assessment thresholds:

• Level 1 Award: Requires at least 60% in each assessment, with a longest single assessment time limit of 120 minutes.
• Level 2 Certificate: Requires 70% in knowledge tests and assignments, and 60% in the examination, with a longest single assessment time limit of 120 minutes.
• Level 3 Certificate: Requires 70% in the knowledge test, and 60% in assignments and examination, with a longest single assessment time limit of 180 minutes.

The operational registration deadline across all three qualifications is 1 March 2027. Specific retake procedures, scheduling details, and testing window arrangements vary by accredited centre; check with the official Institute of Accountants and Bookkeepers for administrative details.

Worked examples: how to reason through IAB questions

These are practice questions written for this site, not questions from the real exam. Each explanation shows why the right answer is right and why the others are wrong.

Example 1

Question: Which federal form must employees complete to indicate their withholding allowances for federal income tax purposes?

1. Form W-2
2. Form W-4
3. Form 941
4. Form 1099

Answer: B. Form W-4

Explanation:

Form W-4 is correct because employees complete this certificate so employers can calculate the accurate federal income tax withholding from each paycheck. Form W-2 is incorrect because it is an annual summary statement provided by employers showing total earnings and taxes withheld during the calendar period. Form 941 is incorrect because it is an employer quarterly federal tax return used to report wages paid and payroll taxes withheld, rather than an employee withholding certificate. Form 1099 is incorrect because it reports non-employee compensation, dividends, or miscellaneous income paid to independent contractors. The general rule to remember is that Form W-4 establishes withholding parameters at the start of employment, whereas Form W-2 and Form 1099 report historical payments, and Form 941 reports aggregate employer payroll totals.

Example 2

Question: What does 'compliance' mean in business law?

1. Meeting the ethical expectations of the industry.
2. Following all legal and regulatory requirements.
3. Achieving maximum profits.
4. Adhering to internal company policies.

Answer: B. Following all legal and regulatory requirements.

Explanation:

Following all legal and regulatory requirements is correct because compliance denotes adherence to mandatory statutes, government regulations, and relevant administrative rules governing business operations. Meeting ethical expectations of the industry is incorrect because ethical codes represent voluntary standards or professional ideals rather than enforceable statutory law. Achieving maximum profits is incorrect because financial gain represents an economic objective rather than a legal duty, and pursuit of profit must remain subordinate to lawful conduct. Adhering to internal company policies is incorrect because internal workplace rules, while important for operational discipline, do not fulfill external statutory mandates on their own. The general rule to remember is that compliance strictly concerns conformity with external legal and regulatory obligations.

Example 3

Question: Why is the statement of cash flows important for investors?

1. It shows the company’s profitability.
2. It shows how the company manages its cash and investments.
3. It shows the company’s revenue and expenses.
4. It shows the company’s stock performance.

Answer: B. It shows how the company manages its cash and investments.

Explanation:

Showing how the company manages its cash and investments is correct because the statement of cash flows details actual cash inflows and outflows across operating, investing, and financing activities. It shows whether a firm generates sufficient liquid funds to sustain obligations and reinvest. Showing profitability is incorrect because profitability is measured on the income statement through accrual accounting concepts rather than direct cash flow. Showing revenue and expenses is incorrect because revenue and expenses belong to the income statement, which includes non-cash items such as depreciation. Showing stock performance is incorrect because market valuation and share price movements reflect exchange trading activity rather than financial statements prepared by the entity. The general rule to remember is that the cash flow statement demonstrates liquidity and cash generation, while the income statement tracks accounting revenues and expenses.

How to use these practice tests

Begin your revision by reviewing official qualification specifications from the Institute of Accountants and Bookkeepers to clarify assessment structures and grading thresholds. Pair official texts with topic-focused practice sets to test recall on ledger entries, reconciliations, and statutory filings.

Work through focused modules in sequence:

• Build core ledger and reporting competence with IAB Financial Accounting & Reporting and IAB Payroll Processing & Administration.
• Review statutory obligations and workplace governance using IAB Business Law & Ethics and IAB Regulatory Compliance.
• Solidify calculations and return requirements through IAB Taxation & Compliance.

Simulate exam conditions by completing full timed sessions using the Start Practice Test module. For Level 1 and Level 2 assessments, pace your work within the 120 minutes allocation. For Level 3 assessments, budget your work across the 180 minutes limit. Note recurring errors in ledger balancing or regulatory concepts, return to syllabus notes, and repeat questions until calculations and definitions become consistent.

Sources & last verified

1. Institute of Accountants and Bookkeepers — time limit, passing score, eligibility (official source). “Longest single assessment 2-hour assignment” Verified Oct 27, 2026.
2. Institute of Accountants and Bookkeepers — exam fee (official source). “UK Student Membership £125” Verified Oct 27, 2026.
3. find-a-qualification.services.ofqual.gov.uk — delivery, registration deadline (official source). “Assessment methods E-assessment Specification View this qualification's specification Sector subject area Accounting and finance Awarding organisation Institute of Accountants and Bookkeepers Grading type Pass/Fail” Verified Oct 27, 2026.
4. find-a-qualification.services.ofqual.gov.uk — delivery, registration deadline (official source). “Assessment methods E-assessment Specification View this qualification's specification Sector subject area Accounting and finance Awarding organisation Institute of Accountants and Bookkeepers Grading type Pass/Fail” Verified Oct 27, 2026.
5. find-a-qualification.services.ofqual.gov.uk — registration deadline, delivery (official source). “Regulation start date 17 June 2016 Operational start date 01 July 2016 Operational end date 01 March 2027 Final certification date 15 September 2028” Verified Oct 27, 2026.

How we verify: editorial & fact-checking policy. Report an error: contact us.