CPA FAR Financial Reporting Cash Flow MCQs Test 2

Practice CPA 2026 FAR Financial Reporting MCQs from Cash Flow. Get instant results with Explanation.

Practice Quiz 2 for "Cash Flow" (Financial Reporting). Total 31 MCQs available, split into 4 quizzes. Test your understanding of core concepts. Mastering these concepts is essential for securing a high percentile in CPA.

General10 MCQs

1. How are interest paid and dividends paid classified under US GAAP?

A. Under US GAAP, interest paid is an operating activity; dividends paid are financingB. Under US GAAP, interest paid is a financing activity; dividends paid are operatingC. Under US GAAP, both interest paid and dividends paid are operating activitiesD. Under US GAAP, both interest paid and dividends paid are financing activities

2. What is the FASB's preference regarding the direct method?

A. The FASB requires the direct methodB. The FASB requires the indirect methodC. The FASB does not allow the direct methodD. The FASB encourages the direct method but allows both methods

3. How is a gain on the sale of equipment treated under the indirect method?

A. A gain on the sale of equipment is added to net income under the indirect methodB. A gain on the sale of equipment is subtracted from net income under the indirect methodC. A gain on the sale of equipment is reported as an operating cash inflowD. A gain on the sale of equipment is ignored in the statement of cash flows

4. How are changes in current assets and liabilities treated under the indirect method?

A. An increase in current assets is added; an increase in current liabilities is subtractedB. An increase in current assets is added; an increase in current liabilities is addedC. An increase in current assets is subtracted; an increase in current liabilities is addedD. An increase in current assets is subtracted; an increase in current liabilities is subtracted

5. How is the change in prepaid expenses treated under the indirect method?

A. A decrease in prepaid expenses is added; an increase is subtractedB. A decrease in prepaid expenses is subtracted; an increase is addedC. Prepaid expenses do not affect the indirect methodD. A decrease in prepaid expenses is reported as a financing activity

General10 MCQs

6. How is the change in accrued expenses treated under the indirect method?

A. An increase in accrued expenses is subtracted from net incomeB. A decrease in accrued expenses is added to net incomeC. Accrued expenses do not affect operating cash flowD. An increase in accrued expenses is added; a decrease is subtracted

7. What does the statement of cash flows reconcile?

A. The statement of cash flows reconciles the net income to cash flowB. The statement of cash flows reconciles the beginning and ending cash balanceC. The statement of cash flows reconciles the balance sheet and income statementD. The statement of cash flows reconciles the retained earnings

8. What are cash equivalents and how are they reported?

A. Cash equivalents are investments with a maturity of more than one yearB. Cash equivalents are not included in the cash balanceC. Cash equivalents are short-term, highly liquid investments included in the cash balanceD. Cash equivalents are reported as separate from cash

9. How is the acquisition of a business reported on the statement of cash flows?

A. The acquisition of a business is reported as an investing activityB. The acquisition of a business is reported as a financing activityC. The acquisition of a business is reported as an operating activityD. The acquisition of a business is not reported on the statement of cash flows

10. What is the reconciliation requirement for the indirect method?

A. The indirect method does not require a reconciliationB. The reconciliation is only required for the direct methodC. The reconciliation is optionalD. The reconciliation of net income to operating cash flow is required under the indirect method

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Conducting Body: AICPA

Frequency: Exam Frequency Year Round | Time: 120 Minutes

Negative Marking: No

⚡ Test Pattern (Total: 250 MCQs):

Subject breakdown not available.

Merit Formula: -

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CPA FAR Financial Reporting Cash Flow MCQs Test 2

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