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AICPA CPA-Financial Exam Questions
- Topic 1: Financial Statement Concepts
- Topic 2: General Principles of Financial Statement Presentation and Accounting Policies
- Topic 3: Special Accounting Considerations for Certain Financial Assets and Liabilities.
Free AICPA CPA-Financial Exam Actual Questions
Note: Premium Questions for CPA-Financial were last updated On Oct. 08, 2025 (see below)
On January 2, 1993, Quo, Inc. hired Reed to be its controller. During the year, Reed, working closely with Quo's president and outside accountants, made changes in accounting policies, corrected several errors dating from 1992 and before, and instituted new accounting policies.
Quo's 1993 financial statements will be presented in comparative form with its 1992 financial statements.
This question represents one of Quo's transactions. List A represents possible clarifications of these transactions as: a change in accounting principle, a change in accounting estimate, a correction of an error in previously presented financial statements, or neither an accounting change nor an accounting error.
Item to Be Answered
During 1993, Quo determined that an insurance premium paid and entirely expensed in 1992 was for the period January 1, 1992, through January 1, 1994.
List A (Select one)
Choice 'c' is correct. Expensing insurance premiums when paid (rather than allocating them to the periods benefited) is a correction of an error in previously presented financial statements.
According to the FASB conceptual framework, an entity's revenue may result from:
Rule: Revenues are inflows or other enhancements of assets and/or settlements (decreases) in liabilities resulting from the entity's ongoing major operations, not from 'incidental' operations.
Choice 'd' is correct. An entity's revenue may result from a decrease in a liability from primary operations.
Conn Co. reported a retained earnings balance of $400,000 at December 31, 1991. In August 1992, Conn determined that insurance premiums of $60,000 for the three-year period beginning January 1, 1991, had been paid and fully expensed in 1991. Conn has a 30% income tax rate. What amount should Conn report as adjusted beginning retained earnings in its 1992 statement of retained earnings?
Choice 'b' is correct. $428,000 net of tax.
A transaction that is unusual in nature and infrequent in occurrence should be reported separately as a component of income:
Choice 'd' is correct. An extraordinary item (a transaction that is both 'unusual in nature' and 'infrequent in occurrence') should be reported separately as a component of income after discontinued operations of a segment of a business.
The cumulative effect of a change in accounting principle is shown on the retained earnings statement.
This is why memorizing the mnemonic 'idea' is so important.
According to the FASB conceptual framework, predictive value is an ingredient of:
Choice 'd' is correct. Yes - No. Predictive value is an ingredient of relevance but not of reliability.
Memorize:
Bud's relevance to 'PFT.'
Bud's reliability to 'VRN.'
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