Practice Test Geeks(ABA) Accredited Business Accountant Practice Test
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Financial Accounting & Reporting Flashcards

7 cards from real ABA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Financial Accounting & Reporting flashcards as text

  1. Under the allowance method, when a previously written-off account is subsequently collected, the correct journal entry first requires:

    Answer: Debit Accounts Receivable, Credit Allowance for Doubtful Accounts

    Reinstating the written-off account requires debiting Accounts Receivable and crediting Allowance for Doubtful Accounts before recording the cash receipt.

  2. A company issues a 3-year, $100,000 bond at a premium. Which statement correctly describes the carrying value over the bond's life?

    Answer: Carrying value decreases each period toward face value

    When a bond is issued at a premium, the premium is amortized, reducing carrying value toward face value over the bond's life.

  3. Which inventory costing method results in the highest net income during a period of rising prices?

    Answer: FIFO

    FIFO assigns older (lower) costs to COGS during rising prices, leaving higher-cost inventory on the balance sheet and producing higher gross profit.

  4. Under GAAP, which of the following is reported as a component of Other Comprehensive Income (OCI)?

    Answer: Foreign currency translation adjustments

    Foreign currency translation adjustments bypass net income and are recorded directly in OCI under ASC 830.

  5. A lessee signs a 5-year lease for equipment. The lease transfers ownership at the end of the term. How should the lessee classify this lease under ASC 842?

    Answer: Finance lease

    Transfer of ownership is one of the criteria that requires classification as a finance lease under ASC 842.

  6. When a company changes from straight-line to double-declining balance depreciation, this is considered a change in:

    Answer: Accounting estimate requiring prospective application

    A change in depreciation method is treated as a change in accounting estimate and applied prospectively under ASC 250.

  7. Which of the following best describes the matching principle in accrual accounting?

    Answer: Expenses are recorded in the period when the related revenue is recognized

    The matching principle requires expenses to be recognized in the same period as the revenues they help generate.