Financial Accounting
3 free practice tests · 75 questions each · 1h 30min · Four-function calculator on exam
About This Exam
The CLEP Financial Accounting exam measures college-level understanding of the accounting cycle, financial statements, receivables, inventory, long-term assets, liabilities, and cash flows. Questions are written to reflect the official College Board blueprint and mix direct knowledge, application, interpretation, and scenario-based reasoning.
Exam note: A four-function calculator is available during the exam.
What's Covered
- General accounting topics — GAAP, transaction analysis, the accounting cycle, ethics, and forms of business
- Income statement — revenue and expense recognition, cost of goods sold, gains, losses, and profitability
- Balance sheet — cash, receivables, inventory, long-term assets, liabilities, and equity
- Cash flows — operating, investing, financing, and the indirect method
For the official exam description, see the College Board CLEP Financial Accounting page.
Study Tips
- Work from the accounting equation before jumping to journal entries.
- Know which items belong on the income statement, balance sheet, and cash flow statement.
- Practice short numerical items without overcomplicating them; CLEP emphasizes introductory-level computations.
- Distinguish valuation methods and their effects on statements.
- Watch for distractors that confuse cash basis ideas with accrual accounting.
How to Register
Register at clep.collegeboard.org. The exam costs $97 and can be taken at a testing center or remotely. Check with your college for its CLEP credit policy and minimum score requirements before registering. Military service members, their spouses, and eligible veterans may be able to take the exam at no cost through DANTES funding.
About Our Practice Tests
All questions are original and written to match the difficulty, format, and topic coverage of the real exam based on official exam descriptions. We offer two modes: Practice Mode gives you instant feedback and explanations after each question, and Test Mode simulates the real exam with a timer and no feedback until you submit. Both modes are completely free with no account required.
Sample Practice Questions
Review these sample questions to get a feel for the exam. For the full interactive experience, use the Practice Tests above.
Which term best matches the description below?
The relationship stating that assets equal liabilities plus owner’s equity.
- A) GAAP
- B) accounting equation
- C) merchandising business
- D) double-entry accounting
- E) accrual basis accounting
View Answer & Explanation
Correct Answer:
B) accounting equation
accounting equation is the relationship stating that assets equal liabilities plus owner’s equity. In context, after a company borrows cash from a bank, it records both increased cash and increased liabilities.
Which term best matches the description below?
The recording system in which every transaction affects at least two accounts and total debits equal total credits.
- A) merchandising business
- B) accounting equation
- C) double-entry accounting
- D) accrual basis accounting
- E) adjusting entry
View Answer & Explanation
Correct Answer:
C) double-entry accounting
double-entry accounting is the recording system in which every transaction affects at least two accounts and total debits equal total credits. In context, a sale on account increases accounts receivable and increases revenue in the same journal entry.
Which term best matches the description below?
The recognition of revenue when earned and expenses when incurred rather than when cash changes hands.
- A) accounting equation
- B) double-entry accounting
- C) adjusting entry
- D) accrual basis accounting
- E) GAAP
View Answer & Explanation
Correct Answer:
D) accrual basis accounting
accrual basis accounting is the recognition of revenue when earned and expenses when incurred rather than when cash changes hands. In context, a firm records service revenue in December even though the customer will not pay until January.
Which term best matches the description below?
A period-end entry used to update accounts for accruals, deferrals, depreciation, or estimates.
- A) double-entry accounting
- B) accrual basis accounting
- C) GAAP
- D) merchandising business
- E) adjusting entry
View Answer & Explanation
Correct Answer:
E) adjusting entry
adjusting entry is a period-end entry used to update accounts for accruals, deferrals, depreciation, or estimates. In context, an accountant records one month of insurance expense even though the premium was paid earlier for a full year.
Which term best matches the description below?
The generally accepted accounting principles that guide financial reporting in the United States.
- A) GAAP
- B) accrual basis accounting
- C) adjusting entry
- D) merchandising business
- E) accounting equation
View Answer & Explanation
Correct Answer:
A) GAAP
GAAP is the generally accepted accounting principles that guide financial reporting in the United States. In context, a company prepares statements using recognized standards so outside users can compare them meaningfully.