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CPA FAR Accounting & Finance Questions
Practise accounting & finance (finance) for the US CPA Exam — Financial Accounting and Reporting: 10 multiple-choice questions, each with the correct answer and a worked explanation. Click an option to check it, or “New questions” for another set.
Accounting & Finance practice
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Q1.Revenue is recognised under accrual accounting when:
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Answer: B — It is earned (performance obligation satisfied)
Under IFRS 15 / ASC 606 revenue is recognised as obligations are satisfied.
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Q2.What is the present value of $8,000 received in 3 years at a 10% discount rate?
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Answer: D — $6,011
PV = FV/(1 + r)ⁿ = 8,000 / 1.10^3 = $6,011.
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Q3.A debit entry increases:
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Answer: B — Assets and expenses
In double entry, debits increase assets and expenses; credits increase liabilities, equity and revenue.
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Q4.Find the present value of $900 received at the end of each year for 7 years at 10%.
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Answer: D — $4,382
PV of an ordinary annuity = PMT × [1 − (1 + r)⁻ⁿ]/r = 900 × 4.8684 = $4,382.
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Q5.Standard deviation in finance measures:
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Answer: C — Volatility (dispersion) of returns
It measures how widely returns vary around the mean.
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Q6.Find the compound interest on $9,000 at 5% per annum for 3 years, compounded annually.
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Answer: B — $1,418.63
A = P(1 + R/100)^T = 9,000 × 1.05^3 = 10,418.63; CI = A − P = $1,418.63.
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Q7.The CAPM expected return equals:
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Answer: B — Rf + β(Rm − Rf)
Capital Asset Pricing Model: risk-free rate + beta × market risk premium.
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Q8.$20,000 is invested at 5% compounded annually. What is it worth after 2 years?
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Answer: A — $22,050
FV = PV(1 + r)ⁿ = 20,000 × 1.05^2 = $22,050.
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Q9.Diversification mainly reduces:
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Answer: C — Unsystematic (specific) risk
Holding many assets reduces company-specific risk, not market risk.
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Q10.Find the present value of $900 received at the end of each year for 8 years at 8%.
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Answer: B — $5,172
PV of an ordinary annuity = PMT × [1 − (1 + r)⁻ⁿ]/r = 900 × 5.7466 = $5,172.
How to approach accounting & finance questions
Master the accounting equation, the three financial statements and time value of money: FV = PV(1 + r)ⁿ, PV of an annuity = PMT × [1 − (1 + r)⁻ⁿ]/r. Ratios link the statements.
About CPA FAR
US CPA Exam — Financial Accounting and Reporting — conducted by AICPA & NASBA. The core CPA section on financial statements, transactions and governmental accounting.
Original practice questions written for this site in the style and difficulty of each exam’s syllabus. They are not past papers and the site is not affiliated with any exam body. Exam patterns, marking schemes and syllabi change — always check the latest official notification.
CPA FAR practice topics
| Topic | Section | Question source |
|---|---|---|
| Accounting & Finance | Finance | Calculated + question bank |
| Simple & Compound Interest | Quantitative aptitude | Calculated (new numbers every set) |