Everything you need to pass the exam and get the college credit you deserve.
CLEP® is the most popular credit-by-examination program in the country, accepted by more than 2,900 colleges and universities. For over 15 years, REA has helped students pass the CLEP® exam and earn college credit while reducing their tuition costs.
Our CLEP® test preps are perfect for adults returning to college (or attending for the first time), military service members, high-school graduates looking to earn college credit, or home-schooled students with knowledge that can translate into college credit.
There are many different ways to prepare for the CLEP® exam. What's best for you depends on how much time you have to study and how comfortable you are with the subject matter. Our test prep for CLEP® Financial Accounting and the free online tools that come with it, will allow you to create a personalized CLEP® study plan that can be customized to fit you: your schedule, your learning style, and your current level of knowledge.
Here's how it works:
Diagnostic exam at the REA Study Center focuses your study
Our online diagnostic exam pinpoints your strengths and shows you exactly where you need to focus your study. Armed with this information, you can personalize your prep and review where you need it the most.
Most complete subject review for CLEP® Financial Accounting
Our targeted review covers all the material you'll be expected to know for the exam and includes a glossary of must-know terms.
Two full-length practice exams
The online REA Study Center gives you two full-length practice tests and the most powerful scoring analysis and diagnostic tools available today. Instant score reports help you zero in on the CLEP® Financial Accounting topics that give you trouble now and show you how to arrive at the correct answer-so you'll be prepared on test day.
REA is the acknowledged leader in CLEP® preparation, with the most extensive library of CLEP® titles available. Our test preps for CLEP® exams help you earn valuable college credit, save on tuition, and get a head start on your college degree.
About the Author
Read an Excerpt
PASSING THE CLEP FINANCIAL ACCOUNTING EXAM
Congratulations! You're joining the millions of people who have discovered the value and educational advantage offered by the College Board's College-Level Examination Program, or CLEP. This test prep covers everything you need to know about the CLEP Financial Accounting exam, and will help you earn the college credit you deserve while reducing your tuition costs.
There are many different ways to prepare for a CLEP exam. What's best for you depends on how much time you have to study and how comfortable you are with the subject matter. To score your highest, you need a system that can be customized to fit you: your schedule, your learning style, and your current level of knowledge. This book, and the online tools that come with it, allow you to create a personalized study plan through three simple steps: assessment of your knowledge, targeted review of exam content, and reinforcement in the areas where you need the most help. Let’s get started and see how this system works.
Test Yourself & Get Feedback
Score reports from your online diagnostic and practice tests give you a fast way to pinpoint what you already know and where you need to spend more time studying.
Review with the Book
Study the topics tested on the CLEP exam. Targeted review chapters cover everything you need to know.
Improve Your Score
Armed with your score reports, you can personalize your study plan. Review the parts of the book where you’re weakest and study the answer explanations for the test questions you answered incorrectly.
THE REA STUDY CENTER
The best way to personalize your study plan and focus on your weaknesses is to get feedback on what you know and what you don’t know. At the online REA Study Center, you can access two types of assessment: a diagnostic exam and full-length practice exams. Each of these tools provides true-to-format questions and delivers a detailed score report that follows the topics set by the College Board.
Before you begin your review with the book, take the online diagnostic exam. Use your score report to help evaluate your overall understanding of the subject, so you can focus your study on the topics where you need the most review.
Full-Length Practice Exams
These practice tests give you the most complete picture of your strengths and weaknesses. After you've finished reviewing with the book, test what you've learned by taking the first of the two online practice exams. Review your score report, then go back and study any topics you missed. Take the final practice test to ensure you have mastered the material and are ready for test day.
If you're studying and don't have Internet access, you can take the printed tests in the book. These are the same practice tests offered at the REA Study Center, but without the added benefits of timed testing conditions and diagnostic score reports. Because the actual exam is computer-based, we recommend you take at least one practice test online to simulate test-day conditions.
AN OVERVIEW OF THE EXAM
The CLEP Financial Accounting exam covers the material one would find in a college-level Financial Accounting class. The exam assesses the student's knowledge and mastery of the skills and concepts found in an entry-level financial accounting course, including familiarity with accounting concepts and terminology, understanding and analyzing accounting data, and applying accounting techniques to problem-solving situations.
The exam consists of 75 multiple-choice questions, each with five possible answer choices, to be answered in 90 minutes. The approximate breakdown of topics is as follows:
20–30% General Topics
20–30% The Income Statement
30–40% The Balance Sheet
5–10% Statement of Cash Flows
< 5% Miscellaneous
ALL ABOUT THE CLEP EXAMS
What is the CLEP?
CLEP is the most widely accepted credit-by-examination program in North America. CLEP exams are now available in 33 subjects and test the material commonly required in an introductory-level college course. Examinees can earn from three to twelve credits at more than 2,900 colleges and universities in the U.S. and Canada. For a complete list of the CLEP subject examinations offered, visit the College Board website: www.collegeboard.org/clep.
Who takes CLEP exams?
CLEP exams are typically taken by people who have acquired knowledge outside the classroom and who wish to bypass certain college courses and earn college credit. The CLEP program is designed to reward examinees for learning—no matter where or how that knowledge was acquired.
Although most CLEP examinees are adults returning to college, many graduating high school seniors, enrolled college students, military personnel, veterans, and international students take CLEP exams to earn college credit or to demonstrate their ability to perform at the college level. There are no prerequisites, such as age or educational status, for taking CLEP examinations. However, because policies on granting credits vary among colleges, you should contact the particular institution from which you wish to receive CLEP credit.
Who administers the exam?
CLEP exams are developed by the College Board, administered by Educational Testing Service (ETS), and involve the assistance of educators from throughout the United States. The test development process is designed and implemented to ensure that the content and difficulty level of the test are appropriate.
When and where is the exam given?
CLEP exams are administered year-round at more than 1,200 test centers in the United States and can be arranged for candidates abroad on request. To find the test center nearest you and to register for the exam, contact the CLEP Program:
P.O. Box 6600
Princeton, NJ 08541-6600
Phone: (800) 257-9558 (8 a.m. to 6 p.m. ET)
Fax: (609) 771-7088
OPTIONS FOR MILITARY PERSONNEL AND VETERANS
CLEP exams are available free of charge to eligible military personnel and eligible civilian employees. All the CLEP exams are available at test centers on college campuses and military bases. Contact your Educational Services Officer or Navy College Education Specialist for more information. Visit the DANTES or College Board websites for details about CLEP opportunities for military personnel.
Eligible U.S. veterans can claim reimbursement for CLEP exams and administration fees pursuant to provisions of the Veterans Benefits Improvement Act of 2004. For details on eligibility and submitting a claim for reimbursement, visit the U.S. Department of Veterans Affairs website at www.gibill.va.gov/pamphlets/testing.htm.
CLEP can be used in conjunction with the Post-9/11 GI Bill, which applies to veterans returning from the Iraq and Afghanistan theaters of operation. Because the GI Bill provides tuition for up to 36 months, earning college credits with CLEP exams expedites academic progress and degree completion within the funded timeframe.
SSD ACCOMMODATIONS FOR CANDIDATES WITH DISABILITIES
Many test candidates qualify for extra time to take the CLEP exams, but you must make these arrangements in advance. For information, contact:
College Board Services for Students with Disabilities
P.O. Box 6226
Princeton, NJ 08541-6226
Phone: (609) 771-7137 (Monday through Friday, 8 a.m. to 6 p.m. ET)
TTY: (609) 882-4118
Fax: (609) 771-7944
Know the format of the test. CLEP computer-based tests are fixed-length tests. This makes them similar to the paper-and-pencil type of exam because you have the flexibility to go back and review your work in each section.
Learn the test structure, the time allotted for each section of the test, and the directions for each section. By learning this, you will know what is expected of you on test day, and you'll relieve your test anxiety.
Read all the questions—completely. Make sure you understand each question before looking for the right answer. Reread the question if it doesn't make sense.
Annotate the questions. Highlighting the key words in the questions will help you find the right answer choice.
Read all of the answers to a question. Just because you think you found the correct response right away, do not assume that it's the best answer. The last answer choice might be the correct answer.
Work quickly and steadily. You will have 90 minutes to answer 75 questions, so work quickly and steadily. Taking the timed practice tests online will help you learn how to budget your time.
Use the process of elimination. Stumped by a question? Don't make a random guess. Eliminate as many of the answer choices as possible. By eliminating just two answer choices, you give yourself a better chance of getting the item correct, since there will only be three choices left from which to make your guess. Remember, your score is based only on the number of questions you answer correctly.
Don’t waste time! Don't spend too much time on any one question. Remember, your time is limited and pacing yourself is very important. Work on the easier questions first. Skip the difficult questions and go back to them if you have the time.
Look for clues to answers in other questions. If you skip a question you don't know the answer to, you might find a clue to the answer elsewhere on the test.
Acquaint yourself with the computer screen. Familiarize yourself with the CLEP computer screen beforehand by logging on to the College Board website. Waiting until test day to see what it looks like in the pretest tutorial risks injecting needless anxiety into your testing experience. Also, familiarizing yourself with the directions and format of the exam will save you valuable time on the day of the actual test.
Be sure that your answer registers before you go to the next item. Look at the screen to see that your mouse-click causes the pointer to darken the proper oval. If your answer doesn't register, you won't get credit for that question.
THE DAY OF THE EXAM
On test day, you should wake up early (after a good night's rest, of course) and have breakfast. Dress comfortably, so you are not distracted by being too hot or too cold while taking the test. (Note that "hoodies" are not allowed.)
Arrive at the test center early. This will allow you to collect your thoughts and relax before the test, and it will also spare you the anxiety that comes with being late. As an added incentive, keep in mind that no one will be allowed into the test session after the test has begun.
Before you leave for the test center, make sure you have your admission form and another form of identification, which must contain a recent photograph, your name, and signature (i.e., driver's license, student identification card, or current alien registration card). You will not be admitted to the test center if you do not have proper identification.
You may wear a watch to the test center. However, you may not wear one that makes noise, because it may disturb the other test-takers. No cell phones, dictionaries, textbooks, notebooks, briefcases, or packages will be permitted, and drinking, smoking, and eating are prohibited.
Good luck on the CLEP Financial Accounting exam!
Table of Contents
About Our Author
About Research & Education Association
CHAPTER 1 - Passing the CLEP Financial Accounting Exam
The REA Study Center
An Overview of the Exam
All About the CLEP Program
Options for Military Personnel and Veterans
SSD Accommodations for Candidates with Disabilities
6-Week Study Plan
The Day of the Exam
Online Diagnostic Test
CHAPTER 2 - Getting Started
2.1 Balloon Party, Lauren's New Business
2.2 Lauren's First Accounting
2.3 The Balance Sheet Introduced
2.4 Analyzing the Balance Sheet
2.5 Operating Cycle and Fiscal Year
CHAPTER 3 - Making Money
3.1 Operating the Business
3.2 Making Adjustments
3.3 The Income Statement Refined
3.4 The Statement of Owner's Equity
3.5 Keeping Track of Numbers in Accounts
3.6 Using T-Accounts
3.7 How Operations Affect the Balance Sheet
CHAPTER 4 - Watching Over Cash
4.1 Lauren Decides She Needs to Watch Over Cash
4.2 Cash from Operations
4.3 Cash from Investing Activities
4.4 Cash from Financing Activities
4.5 The Direct Method of Presenting the Cash Flow Statement
CHAPTER 5 - Accounting Reports and the Outside World
5.1 Other Users of Lauren's Financial Statements
5.2 Making Sure the Statements Are Accurate
CHAPTER 6 - Debits and Credits
6.1 Introducing Debits and Credits
6.2 Posting the Start-Up Transactions in the T-Accounts
6.3 T-Accounts for Income and Expenses
6.4 Posting Operations to T-Accounts
6.5 Closing Temporary Accounts
6.6 Correcting Errors
6.7 Normal Balances of Accounts
CHAPTER 7 - Journals and Ledgers
7.1 The General Journal
7.2 The General Ledger
7.3 Specialized Journals
7.4 How to Write Vertical Journal Entries
CHAPTER 8 - Controls and Ethics
8.1 Why Balloon Party Should Have Internal Controls
8.2 Lauren Designs Balloon Party’s Internal Controls
8.4 All Internal Controls Are Imperfect
8.5 This Chapter Has Not Told Everything
CHAPTER 9 - Cash and Short-Term Investments
9.1 Reconciling the Bank Statement
9.2 Setting Up a Petty Cash System
9.3 Investing in Short-Term Securities
CHAPTER 10 - Accounts Receivable
10.1 Accrual Accounting for Accounts Receivable
10.2 Cash Basis Accounting for Sales on Account
10.3 The Direct Write-Off Method for Bad Debts
CHAPTER 11 - Other Receivables
11.1 Discounting a Note Receivable at the Bank
11.2 Accruing Interest Receivable
11.3 A Customer Dishonors a Note
11.4 Loans Receivable
11.5 Analysis of Current Assets
CHAPTER 12 - Merchandise Inventories
12.1 Two Methods for Handling Inventory
12.2 The Perpetual Inventory Method
12.3 Following the Trail of Debits
12.4 The Periodic Inventory Method
12.5 Comparing the Four Inventory Systems and Two Methods
12.6 Analyzing How Well a Business Handles Inventory
CHAPTER 13 - Supplies and Prepaids
13.1 Accounting for Prepaid Assets
13.2 Two Methods to Account for Operating Supplies
CHAPTER 14 - Buying and Selling Plant Assets
14.1 Balloon Party Buys a Group of Machines
14.2 Repairs or Improvements
14.3 Disposing of Fixed Assets
14.4 Vertical Journal Entries for Fixed Assets
14.5 The Cash Flow Statement and Fixed Assets
CHAPTER 15 - Depreciation
15.1 Depreciation: Allocating the Cost of Plant Assets
15.2 The Depreciation Expense Formula
15.3 Depreciation Conventions
15.4 The Depreciation Schedule
15.5 Changing Accounting Estimates
CHAPTER 16 - Land, Natural Resources, and Intangible Assets
16.1 Land or Land Improvement?
16.2 Assets You Cannot Grab Hold Of
16.3 Natural Resources
16.4 Vertical Journal Entries for Intangible Assets
CHAPTER 17 - Current Liabilities
17.1 What Does It Mean to "Accrue" a Liability?
17.2 Adjusting Entries at the End of the Period
17.3 Make Sure Wages Get Counted at the End of the Period
17.4 Estimating Warranty Expense
17.5 Loan Amortization Schedules
17.6 Accruing Interest Expense
17.7 Reversing Entries—Making Adjusting Entries Easier
CHAPTER 18 - Long-Term Liabilities
18.1 What Are Bonds?
18.2 Recording the Money Received When Issuing Bonds
18.3 Making the Periodic Cash Payments for Bonds
18.4 Deferring the Recognition of Revenues
CHAPTER 19 -The Equity Section
19.1 The Sole Proprietorship Becomes a Partnership
19.2 What Is a Corporation?
19.3 Balloon Party Partnership Incorporates
19.4 Paying a Dividend
19.5 Treasury Stock
19.6 Closing Entries for a Corporation
CHAPTER 20 - The Final Word on Financial Statements
20.1 The Complete Income Statement
20.2 The Complete Statement of Stockholders' Equity
20.3 The Comprehensive Balance Sheet
20.4 The Complete Cash Flow Statement
20.5 Financial Analysis Methods
Practice Test 1
Detailed Explanations of Answers
Practice Test 2
Detailed Explanations of Answers