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100+ Free CLEP Financial Accounting Practice Questions

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Key Facts: CLEP Financial Accounting Exam

75

approximate multiple-choice questions on the exam

College Board

90 minutes

time limit to complete the exam

College Board

20-80

score scale, with 50 the ACE credit-granting score

College Board / ACE

3

semester hours of credit awarded for a passing score

American Council on Education

30-40%

of the exam covers the balance sheet, the heaviest-weighted area

College Board

$98

CLEP exam fee, plus a test-center administration fee

College Board

The CLEP Financial Accounting exam has approximately 75 multiple-choice questions answered in 90 minutes, covering an introductory college financial accounting course. Content is weighted toward the balance sheet (30-40%), with the income statement and general accounting topics each 20-30%, the statement of cash flows 5-10%, and miscellaneous topics under 5%. It is scored 20-80, with 50 the ACE-recommended credit-granting score worth 3 semester hours. A four-function calculator is built into the testing software. The exam fee is $98 plus a test-center administration fee (source: College Board, clep.collegeboard.org).

Sample CLEP Financial Accounting Practice Questions

Try these sample questions to test your CLEP Financial Accounting exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1What is the fundamental accounting equation that underlies the double-entry system?
A.Assets = Liabilities - Equity
B.Revenue - Expenses = Assets
C.Assets + Liabilities = Equity
D.Assets = Liabilities + Owners' Equity
Explanation: The accounting equation is Assets = Liabilities + Owners' Equity. It must always remain in balance because every transaction affects at least two accounts. Total resources (assets) equal the claims against them from creditors (liabilities) and owners (equity).
2Under the rules of debits and credits, which type of account increases with a debit?
A.Liability accounts
B.Revenue accounts
C.Asset accounts
D.Owners' equity (capital) accounts
Explanation: Assets and expenses are increased by debits and decreased by credits. Liabilities, equity, and revenue are increased by credits and decreased by debits. This is why a cash receipt (an asset increase) is recorded as a debit to Cash.
3Which body's standards are referred to as Generally Accepted Accounting Principles (GAAP) in the United States?
A.The Financial Accounting Standards Board (FASB)
B.The Internal Revenue Service (IRS)
C.The International Accounting Standards Board (IASB)
D.The Public Company Accounting Oversight Board (PCAOB)
Explanation: In the United States, GAAP is established primarily by the Financial Accounting Standards Board (FASB). GAAP is the common set of rules, standards, and procedures that companies follow when preparing financial statements. The SEC recognizes FASB as the authoritative standard-setter for public companies.
4Under accrual-basis accounting, when is revenue recognized?
A.When cash is collected from the customer
B.At the end of the fiscal year regardless of delivery
C.When the customer places an order
D.When the performance obligation is satisfied (goods or services are delivered)
Explanation: Accrual accounting recognizes revenue when it is earned, meaning when the performance obligation is satisfied by transferring goods or services to the customer, regardless of when cash is received. This is the revenue recognition principle and contrasts with cash-basis accounting.
5The matching principle requires that expenses be recorded in the same period as the:
A.Cash payments related to them
B.Date the budget was approved
C.Year the company was founded
D.Revenues they helped to generate
Explanation: The matching principle (expense recognition principle) states that expenses should be recognized in the same period as the revenues they help to produce. For example, cost of goods sold is recorded in the period the related sale is recognized, providing an accurate measure of net income.
6Which financial statement reports a company's financial position at a single point in time?
A.The income statement
B.The statement of cash flows
C.The balance sheet
D.The statement of retained earnings
Explanation: The balance sheet (statement of financial position) reports assets, liabilities, and equity as of a specific date, a single point in time. The income statement, statement of cash flows, and statement of retained earnings all cover a period of time rather than a single moment.
7A company purchases equipment for cash. What is the effect on the accounting equation?
A.Total assets increase and liabilities increase
B.Liabilities increase and equity decreases
C.Total assets decrease and equity decreases
D.Total assets remain unchanged
Explanation: Buying equipment for cash swaps one asset (cash) for another asset (equipment). Total assets are unchanged because the decrease in cash is exactly offset by the increase in equipment. Liabilities and equity are not affected.
8The going concern assumption means that:
A.A business will be sold within one year
B.The owner and the business are the same legal entity
C.All assets must be reported at liquidation value
D.A business is expected to continue operating into the foreseeable future
Explanation: The going concern assumption presumes that a business will continue to operate indefinitely, or at least long enough to meet its objectives and commitments. This justifies reporting assets at historical cost rather than liquidation value and deferring certain costs as assets.
9The economic entity assumption requires that:
A.The activities of a business be kept separate from those of its owners
B.Financial statements be prepared in a foreign currency
C.Revenue be recognized only when cash is received
D.All transactions be recorded at fair value
Explanation: The economic (or business) entity assumption holds that the financial activities of a business must be recorded and reported separately from those of its owners and from other businesses. This keeps personal transactions out of the company's books and ensures meaningful financial statements.
10Which sequence correctly describes steps in the accounting cycle?
A.Prepare financial statements, then journalize transactions, then post
B.Prepare a trial balance, then journalize the original transactions
C.Close accounts, then journalize, then post adjusting entries
D.Journalize transactions, post to the ledger, prepare a trial balance
Explanation: The accounting cycle begins by journalizing transactions, then posting them to the ledger, then preparing a trial balance. Adjusting entries, an adjusted trial balance, financial statements, and closing entries follow. Recording must come before any summarizing step.

About the CLEP Financial Accounting Exam

The CLEP Financial Accounting exam covers the material taught in a one-semester introductory financial accounting course. Administered by the College Board, it has approximately 75 multiple-choice questions to be answered in 90 minutes. The exam tests generally accepted accounting principles, the accounting cycle, and the preparation and analysis of the income statement, balance sheet, and statement of cash flows. A passing score of 50 is the ACE-recommended credit-granting score, worth 3 semester hours at many institutions.

Questions

75 scored questions

Time Limit

90 minutes

Passing Score

50 (on a 20-80 scale)

Exam Fee

$98 plus test-center administration fee (College Board)

CLEP Financial Accounting Exam Content Outline

20-30%

General Topics

GAAP, the accounting equation, double-entry bookkeeping, the accounting cycle, accrual vs. cash basis, and ethics.

20-30%

The Income Statement

Income statement format, revenue and expense recognition, cost of goods sold, gross profit, and operating vs. nonoperating items.

30-40%

The Balance Sheet

Cash, receivables, inventory, plant assets and depreciation, intangibles, liabilities, bonds, and stockholders' equity.

5-10%

Statement of Cash Flows

Classifying operating, investing, and financing activities and preparing the statement by the indirect method.

Less than 5%

Miscellaneous

Investments, contingent liabilities, and other special problems.

How to Pass the CLEP Financial Accounting Exam

What You Need to Know

  • Passing score: 50 (on a 20-80 scale)
  • Exam length: 75 questions
  • Time limit: 90 minutes
  • Exam fee: $98 plus test-center administration fee

Keys to Passing

  • Complete 500+ practice questions
  • Score 80%+ consistently before scheduling
  • Focus on highest-weighted sections
  • Use our AI tutor for tough concepts

CLEP Financial Accounting Study Tips from Top Performers

1Master the accounting equation (Assets = Liabilities + Equity) and the rules of debits and credits first — almost every question builds on them.
2Memorize the normal balance of each account type: assets and expenses are debit-normal; liabilities, equity, and revenue are credit-normal.
3Practice the full accounting cycle end to end: journalize, post, trial balance, adjust, close, and prepare statements.
4Drill financial-statement ratios (current ratio, quick ratio, gross margin, debt-to-equity) since the balance sheet is the heaviest-weighted area.
5Understand the difference between accrual and cash basis and how adjusting entries for accruals, deferrals, and depreciation affect each statement.

Frequently Asked Questions

How many questions are on the CLEP Financial Accounting exam and how long is it?

The exam has approximately 75 multiple-choice questions to be answered in 90 minutes. Some questions are unscored pretest items embedded among the scored questions.

What score do I need to pass the CLEP Financial Accounting exam?

Scores range from 20 to 80, and the American Council on Education recommends a score of 50 as the credit-granting score, worth 3 semester hours. Individual colleges may set a different required score.

Can I use a calculator on the CLEP Financial Accounting exam?

Yes. A four-function calculator is built into the testing software, so you do not bring your own. The math is limited to basic arithmetic for accounting computations.

What topics does the CLEP Financial Accounting exam cover?

It covers general accounting topics and GAAP (20-30%), the income statement (20-30%), the balance sheet (30-40%), the statement of cash flows (5-10%), and miscellaneous items such as investments (under 5%).

How much does the CLEP Financial Accounting exam cost?

The CLEP exam fee is $98, plus a separate administration fee charged by the test center. Some test centers and military programs offer fee assistance.

Is the CLEP Financial Accounting exam hard?

It is equivalent to a one-semester introductory financial accounting college course. If you understand debits and credits, the accounting cycle, and how to read the three core financial statements, it is very passable with focused study.