100 US GAAP MCQs for *CMA Part 1: Financial Accounting

100 US GAAP MCQs for *CMA Part 1: Financial Accounting

100 US GAAP MCQs for *CMA Part 1: Financial Accounting* new syllabus. Grouped by topic. Exam style + 1-line why for each. 

*Note:* CMA Part 1 uses US GAAP for F/S reporting Qs, but main focus = managerial accounting. Still, these concepts show up in Section C “Financial Statement Analysis” + ethics/corporate finance.

*Batch 1: Concepts, Conventions, Principles, Stakeholders 1-15*

*Q1.* Which principle requires expenses matched with revenues of same period?  

A. Revenue recognition  B. Matching  C. Conservatism  D. Consistency  

*Ans: 

*Q2.* “Record asset at historical cost, not market value” is which convention?  

A. Conservatism  B. Materiality  C. Historical cost  D. Going concern  

*Ans: 

*Q3.* Assumption that business will continue indefinitely is?  

A. Entity  B. Periodicity  C. Going concern  D. Monetary unit  

*Ans: 

*Q4.* Stakeholder with primary interest in dividends + share price?  

A. Creditor  B. Employee  C. Shareholder  D. Govt  

*Ans: 

*Q5.* Bank lending money is concerned mainly with?  

A. Profitability  B. Liquidity + solvency  C. Growth  D. Market share  

*Ans: 

*Q6.* Conflict of interest for manager:  

A. Maximize shareholder wealth by legal means  

B. Approve project giving personal bonus but negative NPV for company  

C. Follow GAAP  

D. Reduce cost  

*Ans:

*Q7.* Goal congruence means:  

A. All depts have same budget  

B. Individual goals align with org goals  

C. CEO decides all goals  

D. No conflict ever  

*Ans: 

*Q8.* Conservatism convention:  

A. Overstate assets, understate liabilities  

B. Anticipate losses, not gains  

C. Record all gains immediately  

D. Ignore uncertainty  

*Ans: 

*Q9.* Materiality depends on:  

A. Size only  B. Nature + size + context  

C. Auditor’s opinion only  D. Tax law  

*Ans: 

*Q10.* Consistency principle violated if:  

A. Company uses FIFO both years  

B. Company switches FIFO to LIFO without disclosure  

C. Company depreciates SLM both years  

D. Company follows GAAP  

*Ans: 

*Q11.* Entity concept means:  

A. Owner + business finances mixed  

B. Business separate from owner  

C. Only corporation is entity  

D. No relevance  

*Ans: 

*Q12.* Primary users of general purpose financial statements per FASB?  

A. Mgmt only  B. Investors + creditors  

C. Govt only  D. Employees only  

*Ans: 

*Q13.* Dual aspect concept means:  

A. 2 accountants check each entry  

B. Every transaction has debit + credit  

C. 2 financial statements  

D. 2 methods for depreciation  

*Ans:

*Q14.* Realization principle for revenue:  

A. Cash received  B. Earned + realizable  

C. Order received  D. Budget made  

*Ans: .

*Q15.* Which is NOT qualitative characteristic of useful info?  

A. Relevance  B. Reliability  C. Comparability  D. Conservatism  

*Ans: 

*Batch 2: Depreciation, Impairment 16-30*

*Q16.* Machine cost $100k, salvage $10k, life 9 yrs. SLM annual dep?  

A. $10k  B. $11,111  C. $9,000  D. $12,000  

*Ans: 

*Q17.* Under SLM, dep expense each year is:  

A. Increasing  B. Decreasing  C. Constant  D. Zero  

*Ans:

*Q18.* Asset carrying value $80k, fair value $60k, undiscounted CF $70k. Impairment loss?  

A. $0  B. $10k  C. $20k  D. $80k  

*Ans: 

*Q19.* Impairment loss under GAAP recognized in:  

A. OCI  B. P&L  C. Equity  D. Not recognized  

*Ans: 

*Q20.* After impairment, new dep base = ?  

A. Old cost  B. New carrying value / remaining life  

C. Fair value  D. Original cost  

*Ans:

*Q21.* Units-of-production dep depends on:  

A. Time  B. Output/units produced  

C. SLM rate  D. Market value  

*Ans:

*Q22.* Dep is process of:  

A. Valuation  B. Allocation of cost  

C. Cash outflow  D. Funding replacement  

*Ans: 

*Q23.* Land is not depreciated because:  

A. No cost  B. Indefinite useful life  

C. GAAP prohibits  D. Tax rule  

*Ans:

*Q24.* If salvage value increases, SLM dep:  

A. Increases  B. Decreases  C. No change  D. Becomes zero  

*Ans: 

*Q25.* Impairment test under GAAP done when:  

A. Every year  B. Triggering event/indicator exists  

C. Only at sale  D. Never  

*Ans: 

*Q26.* Gain on sale of PPE recorded if:  

A. Proceeds > CV  B. Proceeds < CV  

C. Always  D. Never  

*Ans: 

*Q27.* Accumulated depreciation is:  

A. Asset  B. Liability  C. Contra-asset  

D. Equity  

*Ans: 

*Q28.* Change in dep method is:  

A. Error  B. Change in estimate – prospective  

C. Change in policy – retrospective  

D. Fraud  

*Ans: 

*Q29.* Capital expenditure increases:  

A. Expense  B. Asset value  

C. Liability  D. Revenue  

*Ans: 

*Q30.* Revenue expenditure is:  

A. Capitalized  B. Expensed in period  

C. Added to asset  D. Deferred  

*Ans: 

*Batch 3: Inventory FIFO LIFO 31-45*

*Q31.* During inflation, FIFO vs LIFO: COGS?  

A. FIFO > LIFO  B. FIFO < LIFO  

C. Same  D. Can’t say  

*Ans:

*Q32.* During inflation, ending inventory value highest under?  

A. FIFO  B. LIFO  C. Weighted avg  D. Same  

*Ans: 

*Q33.* US GAAP allows which inventory method?  

A. FIFO  B. LIFO  C. Both FIFO + LIFO  D. Only weighted avg  

*Ans: 

*Q34.* LIFO liquidation occurs when:  

A. Inventory units increase  B. Inventory units decrease below base  

C. Price increases  D. Price decreases  

*Ans: .

*Q35.* LCM rule under GAAP: inventory valued at?  

A. Cost  B. Market  C. Lower of cost or net realizable value  

D. Higher of cost or market  

*Ans: 

*Q36.* Purchase 100@10, 100@12, sold 120. FIFO COGS?  

A. $1,240  B. $1,200  C. $1,320  D. $1,100  

*Ans: 

*Q37.* Same data, LIFO COGS?  

A. $1,240  B. $1,200  C. $1,320  D. $1,100  

*Ans: 

*Q38.* During deflation, FIFO profit vs LIFO?  

A. FIFO profit < LIFO  

B. FIFO profit > LIFO  

C. Same  

D. Zero  

*Ans: 

*Ans: 

*Q39.* Inventory shrinkage recorded as:  

A. Increase asset  B. Expense loss  

C. Liability  D. Revenue  

*Ans: 

*Q40.* Periodic vs perpetual: diff in timing of?  

A. Purchase entry  B. COGS recognition  

C. Sales entry  D. Cash

*Q41.* Weighted avg cost per unit = ?  

A. Total cost / total units  

B. Latest cost  

C. Oldest cost  

D. Market price  

*Ans: 

*Q42.* LIFO conformity rule requires:  

A. Use LIFO for tax if used for financial  

B. Use FIFO for tax  

C. No rule  

D. Use avg for tax  

*Ans: 

*Q43.* Inventory turnover = ?  

A. COGS / Avg inventory  

B. Sales / Inventory  

C. Profit / Inventory  

D. Assets / Inventory  

*Ans: 

*Q44.* Net realizable value = ?  

A. Selling price  

B. Selling price - completion + disposal cost  

C. Cost  

D. Market price  

Ans 

*Q45.* Write-down of inventory under GAAP:  

A. Reversed if value recovers  

B. Not reversed  

C. Added to asset  

D. Goes to equity  

*Ans: 

*Batch 4: Receivables, Allowance, Cash Flow 46-60*

*Q46.* Allowance for doubtful accounts is:  

A. Asset  B. Contra-asset  

C. Liability  D. Expense  

*Ans: 

*Q47.* Bad debt expense under allowance method recorded when?  

A. Customer defaults  

B. At time of sale, based on estimate  

C. Cash received  

D. Year end only  

*Ans: 

*Q48.* Write-off of AR: Debit?  

A. Bad debt expense  

B. Allowance for doubtful accounts  

C. Cash  

D. Sales  

*Ans

*Q49.* Recovery of written-off AR: Credit?  

A. Cash  B. Allowance  C. Bad debt expense  D. Sales  

*Ans: 

*Q50.* Age-wise analysis used for:  

A. Dep method  

B. Estimating allowance for doubtful accounts  

C. Inventory valuation  

D. Tax  

*Ans:.

*Q51.* CFO under indirect method starts with:  

A. Cash  B. Net income  

C. Sales  D. Assets  

*Ans: 

*Q52.* Increase in AR during year:  

A. Added to NI for CFO  B. Deducted from NI  

C. No effect  D. Added to CFI  

*Ans 

*Q53.* Depreciation expense in CFO:  

A. Deducted  B. Added back to NI  

C. Ignored  D. Part of CFI  

*Ans: 

*Q54.* Purchase of equipment is:  

A. CFO  B. CFI  C. CFF  D. Not CF  

*Ans: 

*Q55.* Issue of bonds is:  

A. CFO  B. CFI  C. CFF  D. Not CF  

*Ans: 

*Q56.* Loss on sale of asset in CFO:  

A. Deducted  B. Added back to NI  

C. Ignored  D. Part of CFI  

*Ans: 

*Q57.* Cash basis vs accrual: accrual records?  

A. Only cash  B. Revenue when earned, expense when incurred  

C. Only expenses  D. Only revenue  

*Ans: 

*Q58.* Prepaid insurance $12k for 1 yr, 3 months passed. Expense?  

A. $12k  B. $3k  C. $9k  D. $0  

*Ans: 

*Q59.* Unearned revenue is:  

A. Asset  B. Liability  C. Equity  D. Revenue  

*Ans: 

*Q60.* Accrued expense means:  

A. Paid in advance  

B. Incurred but not yet paid  

C. Paid and incurred  

D. Not incurred  

*Ans:

*Batch 5: Tax, Deferred Tax, Capital Theories 61-80*

*Q61.* Current tax expense based on:  

A. Accounting profit  B. Taxable profit  

C. Revenue  D. Cash profit  

*Ans:

*Q62.* Deferred tax arises due to:  

A. Permanent difference  

B. Temporary difference  

C. Both  

D. Neither  

*Ans: 

*Q63.* Permanent difference example:  

A. Depreciation diff  

B. Fine/penalty not deductible  

C. Warranty provision  

D. Unearned revenue  

*Ans

*Q64.* Temp difference: tax dep > book dep creates?  

A. Deferred tax asset  

B. Deferred tax liability  

C. Current tax asset  

D. No effect  

*Ans: 

*Q65.* DTL shown in:  

A. Asset side  B. Liability side  

C. Equity  D. Not shown  

*Ans: 

*Q66.* Prior period excess tax provision $5k rectified. Entry?  

A. Dr Tax exp Cr Cash  

B. Dr Tax payable Cr Retained earnings  

C. Dr Retained earnings Cr Tax payable  

D. Dr Cash Cr Revenue  

*Ans

*Q67.* Capital maintenance: proprietary theory views equity as?  

A. Residual interest of owner  

B. Creditor claim  

C. Govt claim  

D. Employee claim  

*Ans: 

*Q68.* Entity theory treats business as separate from?  

A. Creditors  B. Owner  

C. Employees  D. Govt  

*Ans: 

*Q69.* Residual theory: income belongs to?  

A. Creditors  B. Govt  

C. Residual claimant = common shareholders  

D. Employees  

*Ans: 

*Q70.* Financial capital maintenance means?  

A. Physical capacity maintained  

B. Money amount of equity maintained  

C. Asset value maintained  

D. No depreciation  

*Ans: 

*Q71.* Physical capital maintenance means?  

A. Money capital maintained  

B. Operating capacity maintained  

C. Profit maintained  

D. Sales maintained  

*Ans:

*Q72.* Deferred tax asset arises when:  

A. Taxable profit > accounting profit  

B. Taxable profit < accounting profit  

C. No difference  

D. Always  

*Ans:

*Q73.* Valuation allowance on DTA if:  

A. DTA will be realized  

B. “More likely than not” DTA not realized  

C. Always required  

D. Never required  

*Ans: 

*Q74.* Timing difference = synonym for?  

A. Permanent difference  

B. Temporary difference  

C. Current tax  

D. Tax rate  

*Ans: 

*Q75.* Tax rate change affects:  

A. Current tax only  

B. DTA/DTL balance  

C. Cash only  

D. No effect  

*Ans: 

*Q76.* Risk contingency in accounting:  

A. Record liability if probable + estimable  

B. Always record  

C. Never record  

D. Disclose only if remote  

*Ans

*Q77.* Remote contingency:  

A. Accrue  B. Disclose  C. Ignore  

D. Record as asset  

*Ans: 

*Q78.* Reasonably possible contingency:  

A. Accrue  B. Disclose in notes  

C. Ignore  D. Record as asset  

*Ans: 

*Q79.* Gross profit = ?  

A. Sales - COGS  

B. Sales - all expenses  

C. Operating income  

D. Net income  

*Ans: 

*Q80.* Operating profit = ?  

A. Gross profit - operating expenses  

B. Sales - COGS  

C. Net income + tax  

D. EBITDA  

*Ans: 

*Batch 6: Reporting, Ratios, Other 81-100*

*Q81.* Annual report includes:  

A. Only B/S  

B. B/S, IS, CF, Notes, MD&A  

C. Only IS  

D. Only auditor report  

*Ans: 

*Q82.* MD&A section explains:  

A. Only numbers  

B. Mgmt view on results + future risks  

C. Auditor opinion  

D. Tax details  

*Ans: 

*Q83.* Notes to accounts provide:  

A. Summary only  

B. Detail + accounting policies  

C. Cash only  

D. Not required  

*Ans: 

*Q84.* Auditor’s report gives:  

A. Mgmt opinion  

B. Independent opinion on F/S fairness  

C. Tax opinion  

D. Budget  

*Ans: 

*Q85.* Current ratio = ?  

A. Current assets / Current liabilities  

B. Quick assets / CL  

C. Cash / CL  

D. Total assets / TL  

*Ans: 

*Q86.* Quick ratio excludes:  

A. Cash  B. Inventory  

C. AR  D. Marketable securities  

*Ans: 

*Q87.* Debt-to-equity ratio measures:  

A. Profitability  B. Leverage/solvency  

C. Efficiency  D. Liquidity  

*Ans: 

*Q88.* ROE = ?  

A. NI / Sales  B. NI / Avg equity  

C. Sales / Assets  D. EBIT / Assets  

*Ans:

*Q89.* ROA = ?  

A. NI / Avg assets  

B. Sales / Assets  

C. Gross profit / Assets  

D. EBIT / Equity  

*Ans: 

*Q90.* Days sales outstanding = ?  

A. 365 / AR turnover  

B. 365 / Inventory turnover  

C. AR / Sales  

D. Sales / AR  

*Ans: 

*Q91.* Inventory days = ?  

A. 365 / Inventory turnover  

B. COGS / Inventory  

C. Sales / Inventory  

D. 365 / AR turnover  

*Ans: 

*Q92.* Prior period error correction under GAAP:  

A. Current year income  

B. Restate prior year + adjust opening RE  

C. Ignore  

D. Add to expense  

*Ans: 

*Q93.* Change in accounting principle under GAAP:  

A. Prospective  B. Retrospective with cumulative adjustment  

C. Ignore  D. Current year only  

*Ans: 

*Q94.* Segment reporting required when?  

A. Always  B. Public company with reportable segments  

C. Never  D. Only for tax  

*Ans: 

*Q95.* EPS = ?  

A. NI / Shares outstanding  

B. Sales / Shares  

C. Assets / Shares  

D. Debt / Shares  

*Ans: 

*Q96.* Comprehensive income includes:  

A. NI only  

B. NI + OCI items  

C. Cash flow only  

D. Revenue only  

*Ans:

*Q97.* OCI example:  

A. Sales revenue  

B. Unrealized gain on AFS securities  

C. Wages expense  

D. Interest expense  

Ans 

*Q98.* Related party transaction must be:  

A. Ignored  B. Disclosed in notes  

C. Recorded at market always  

D. Not allowed  

*Ans: 

*Q99.* Going concern uncertainty: auditor?  

A. Unqualified always  

B. Add emphasis paragraph if doubt  

C. Ignore  

D. Adverse opinion  

*Ans:

*Q100.* Subsequent event after year-end but before issue date:  

A. Always adjust F/S  

B. Adjust if provides evidence of condition at B/S date  

C. Ignore always  

D. Add to next year  

*Ans: 

www.gmsisuccess.in

Mcq domain 5 CISA cerification exam with answers

Here are *50 Case-Based MCQs – CISA Domain 5: Information System Operations, Maintenance & Service Management*  

Weight: 23% = ∼36-37 Qs. Focus: IT ops, BCP/DRP, capacity, performance, change, problem mgmt.

*Batch 1: IT Operations & Capacity Mgmt 1-10*

*Q1. Capacity*  

Case: Server CPU at 95% every month-end for 4 hrs. Rest of month at 40%.  

*Q:* Auditor’s BEST recommendation?  

A. Buy new server immediately  

B. Monitor trend + capacity plan for peak  

C. Reduce user access during month-end  

D. Increase RAM only  

*Ans: B* | Ops mgmt = trend analysis + capacity planning before spending. CISA: “plan for peak, not average”.

*Q2. Job Scheduling*  

Case: Batch job for payroll runs 2 AM. If delayed, salary credited late. No alert setup.  

*Q:* Control weakness?  

A. No segregation of duties  

B. No job scheduling monitoring + alerting  

C. No change mgmt  

D. No backup  

*Ans: B* | Ops control: critical job monitoring + escalation.

*Q3. Performance Mgmt*  

Case: Helpdesk SLA = 4 hrs. Avg resolution = 6 hrs. No SLA breach report.  

*Q:* Auditor should recommend?  

A. Hire more staff  

B. Implement performance mgmt + SLA reporting  

C. Reduce ticket volume  

D. Change SLA to 8 hrs  

*Ans: B* | Ops mgmt needs measurement + reporting before action.

*Q4. Media Handling*  

Case: Backup tapes stored next to server room. No fire protection.  

*Q:* Biggest risk?  

A. Theft  

B. Loss of data due to fire/disaster  

C. Unauthorized access  

D. Media degradation  

*Ans: B* | Offsite + fireproof storage = Domain 5 key.

*Q5. Patch Mgmt*  

Case: OS patches applied directly to prod without testing.  

*Q:* Control violation?  

A. No change mgmt  

B. No capacity planning  

C. No BCP  

D. No access control  

*Ans: A* | Patch = change. Must test in non-prod first.

*Q6. Storage*  

Case: SAN utilization 98%. No alert + no expansion plan.  

*Q:* Auditor concern?  

A. Confidentiality  

B. Availability risk due to no capacity mgmt  

C. Integrity  

D. Non-repudiation  

*Ans: B* | Capacity mgmt = prevent downtime.

*Q7. Operator Logs*  

Case: Operators manually restart failed jobs but no log maintained.  

*Q:* Missing control?  

A. Change mgmt  

B. Audit trail/operator logs  

C. Access control  

D. Encryption  

*Ans: B* | Ops logs needed for accountability + troubleshooting.

*Q8. Environmental*  

Case: Data center temp hits 35°C in summer. No temp monitoring alert.  

*Q:* Risk?  

A. Data leakage  

B. Hardware failure + service interruption  

C. Virus attack  

D. User error  

*Ans: B* | Environmental controls = ops mgmt.

*Q9. Print Mgmt*  

Case: Sensitive reports printed and left on printer overnight.  

*Q:* Control?  

A. Encryption  

B. Secure print release + clean desk policy  

C. Firewall  

D. Backup  

*Ans: B* | Physical ops control for output mgmt.

*Q10. Vendor Mgmt*  

Case: Cloud vendor outage 6 hrs/month. No SLA penalty clause.  

*Q:* Auditor rec?  

A. Switch vendor  

B. Define SLA with penalty + monitoring  

C. Accept outage  

D. Increase bandwidth  

*Ans: B* | Ops = vendor SLA mgmt.

*Batch 2: BCP & DRP 11-25*

*Q11. BIA*  

Case: Company lists 200 apps as “critical” for DR. No prioritization.  

*Q:* Missing step?  

A. Risk assessment  

B. Business Impact Analysis to prioritize RTO/RPO  

C. Backup test  

D. Insurance  

*Ans: B* | BIA = first step to identify critical processes + RTO/RPO.

*Q12. RTO vs RPO*  

Case: Mgmt says “We can afford 24 hrs data loss but must be up in 4 hrs”.  

*Q:* RTO = ?, RPO = ?  

A. RTO 24h, RPO 4h  

B. RTO 4h, RPO 24h  

C. Both 4h  

D. Both 24h  

*Ans: B* | RTO = recovery time, RPO = data loss tolerance.

*Q13. DR Site*  

Case: DR site is in same city, same power grid as primary.  

*Q:* Weakness?  

A. Cost  

B. Not geographically separate → single point of failure  

C. No test  

D. No staff  

*Ans: B* | DR site must avoid common-mode failures.

*Q14. DR Test*  

Case: DR plan exists but never tested in 3 years.  

*Q:* Auditor finding?  

A. Plan outdated + unproven effectiveness  

B. No BIA  

C. No risk assessment  

D. No insurance  

*Ans: A* | CISA: DR plan must be tested + maintained.

*Q15. Backup*  

Case: Full backup weekly, no incremental/differential. Restore takes 20 hrs.  

*Q:* Issue?  

A. Backup frequency  

B. RTO will not be met  

C. No encryption  

D. No offsite  

*Ans: B* | Backup strategy must meet RTO.

*Q16. Crisis Mgmt*  

Case: Fire alarm triggers. Staff don’t know evacuation route.  

*Q:* Missing?  

A. DR plan  

B. BCP awareness training + drills  

C. Insurance  

D. Backup  

*Ans: B* | BCP = people + process, not just IT.

*Q17. MOU*  

Case: Company has MOU with vendor for DR site but no contract/SLA.  

*Q:* Risk?  

A. Vendor may deny access during disaster  

B. Cost higher  

C. No encryption  

D. No backup  

*Ans: A* | MOU ≠ legally binding. Need contract.

*Q18. Parallel Test*  

Case: DR test = run primary + DR site together with real data.  

*Q:* Test type?  

A. Tabletop  

B. Parallel test  

C. Full interruption  

D. Simulation  

*Ans: B* | Parallel = both systems run.

*Q19. RPO 0*  

Case: Bank requires zero data loss for transactions.  

*Q:* Backup method?  

A. Weekly full  

B. Synchronous replication  

C. Monthly backup  

D. Manual backup  

*Ans: B* | RPO 0 = real-time sync replication.

*Q20. DR Team*  

Case: Only IT knows DR plan. Business users unaware.  

*Q:* Weakness?  

A. Technical gap  

B. Lack of business involvement in BCP  

C. No budget  

D. No test  

*Ans: B* | BCP owned by business, executed by IT.

*Q21. Hot vs Cold Site*  

Case: Company needs to be up in 2 hrs after disaster.  

*Q:* Suitable site?  

A. Cold site  

B. Warm site  

C. Hot site  

D. Mobile site  

*Ans: C* | Hot = ready instantly. Cold = weeks.

*Q22. Data Backup*  

Case: Backups encrypted but key stored with backup tape.  

*Q:* Risk?  

A. Confidentiality  

B. Availability  

C. Integrity  

D. No risk  

*Ans: A* | Key with data = defeats encryption.

*Q23. BCP Update*  

Case: Org structure changed 6 months ago. BCP still has old contacts.  

*Q:* Control failure?  

A. No change mgmt for BCP  

B. No BIA  

C. No test  

D. No risk assessment  

*Ans: A* | BCP must be updated with org changes.

*Q24. Tabletop Test*  

Case: Mgmt discusses DR plan in meeting room, no systems involved.  

*Q:* Test type?  

A. Full interruption  

B. Tabletop walkthrough  

C. Parallel  

D. Simulation  

*Ans: B* | Tabletop = discussion-based.

*Q25. Alternate Processing*  

Case: DR plan says “use manual process” for 1 week. But manual forms not printed.  

*Q:* Gap?  

A. DR plan not practical/complete  

B. No BIA  

C. No insurance  

D. No backup  

*Ans: A* | Plan must be actionable.

*Batch 3: Change, Problem, Config Mgmt 26-40*

*Q26. Emergency Change*  

Case: Critical bug fix applied to prod without CAB approval due to urgency.  

*Q:* Auditor should check?  

A. Approve it anyway  

B. Post-implementation review + documentation  

C. Punish admin  

D. No issue  

*Ans: B* | Emergency change allowed but must be reviewed + logged after.

*Q27. Problem vs Incident*  

Case: Helpdesk resets password 50 times/day for same app.  

*Q:* This is?  

A. 50 incidents  

B. 1 problem with 50 incidents  

C. Change request  

D. Service request  

*Ans: B* | Problem mgmt = root cause. Incident = symptom.

*Q28. Config Mgmt*  

Case: Server config changed but CMDB not updated.  

*Q:* Risk?  

A. No risk  

B. Inaccurate impact analysis for future changes  

C. Performance issue  

D. Backup failure  

*Ans: B* | CMDB accuracy needed for change mgmt.

*Q29. Change Testing*  

Case: Change tested in prod because “test env not available”.  

*Q:* Violation?  

A. No SoD  

B. Testing in production environment  

C. No BCP  

D. No capacity plan  

*Ans: B* | Prod = last place to test.

*Q30. Rollback*  

Case: Change fails. No rollback plan. System down 8 hrs.  

*Q:* Missing?  

A. Change approval  

B. Backout/rollback plan  

C. BIA  

D. SLA  

*Ans: B* | Every change needs backout plan.

*Q31. RFC*  

Case: User emails admin “add RAM”. Admin does it.  

*Q:* Missing?  

A. Request for Change documentation + approval  

B. Budget  

C. BCP  

D. SLA  

*Ans: A* | Formal change request needed.

*Q32. Known Error DB*  

Case: Same incident resolved by different fix each time.  

*Q:* Missing?  

A. Incident mgmt  

B. Known Error Database + workaround  

C. Change mgmt  

D. Capacity mgmt  

*Ans: B* | Problem mgmt creates KEDB.

*Q33. Config Baseline*  

Case: Auditor can’t tell if current server config = approved config.  

*Q:* Missing?  

A. Config baseline + version control  

B. Backup  

C. SLA  

D. BIA  

*Ans: A* | Baseline = approved config state.

*Q34. Change Window*  

Case: Major change deployed Friday 5 PM. System down all weekend.  

*Q:* Poor practice?  

A. Change timing → not in approved change window  

B. No test  

C. No approval  

D. No BCP  

*Ans: A* | Changes in low-impact window.

*Q35. SoD in Ops*  

Case: Same person schedules job, monitors job, and restarts job.  

*Q:* Risk?  

A. No risk  

B. Lack of segregation in ops  

C. Performance issue  

D. Backup issue  

*Ans: B* | SoD applies to ops too.

*Q36. Problem Trend*  

Case: 30% tickets = “printer not working”. No root cause analysis.  

*Q:* Missing process?  

A. Incident mgmt  

B. Problem mgmt  

C. Change mgmt  

D. Capacity mgmt  

*Ans: B* | Problem mgmt does trend + RCA.

*Q37. Unauthorized Change*  

Case: Admin applies “small fix” directly in prod, no RFC.  

*Q:* Control?  

A. Technical control to prevent direct prod access  

B. More training  

C. BCP  

D. SLA  

*Ans: A* | Preventive control > detective.

*Q38. Post-Imp Review*  

Case: Change implemented. No review after 1 week.  

*Q:* Missing?  

A. Change approval  

B. Post-implementation review to confirm success  

C. BIA  

D. Capacity plan  

*Ans: B* | PIR = close change loop.

*Q39. Config Drift*  

Case: 100 servers should have same config but 20 differ.  

*Q:* Issue?  

A. No config mgmt + compliance check  

B. Performance  

C. Backup  

D. Capacity  

*Ans: A* | Drift = unauthorized changes.

*Q40. Emergency Access*  

Case: Fire call → admin uses emergency account to fix. Account never disabled after.  

*Q:* Risk?  

A. No risk  

B. Orphaned privileged account  

C. Capacity issue  

D. Backup issue  

*Ans: B* | Emergency access must be disabled + reviewed.

*Batch 4: Service Desk, Performance, Other Ops 41-50*

*Q41. SLA Metric*  

Case: SLA says “resolve tickets fast”. No measurable metric.  

*Q:* Issue?  

A. SLA not measurable/SMART  

B. No BCP  

C. No change mgmt  

D. No capacity plan  

*Ans: A* | SLA must have KPI like “avg resolution <4h”.

*Q42. Escalation*  

Case: Critical ticket sits with L1 for 6 hrs. No escalation rule.  

*Q:* Missing?  

A. Incident prioritization + escalation matrix  

B. Change mgmt  

C. Backup  

D. Capacity  

*Ans: A* | Ops = priority + escalation.

*Q43. Performance Baseline*  

Case: System slow but no baseline to compare.  

*Q:* Missing?  

A. Performance baseline for comparison  

B. Backup  

C. BCP  

D. Change mgmt  

*Ans: A* | Can’t say “slow” without baseline.

*Q44. Outsourced Helpdesk*  

Case: Vendor helpdesk has access to all user data.  

*Q:* Risk?  

A. No risk  

B. Excessive access → confidentiality risk  

C. Capacity  

D. Backup  

*Ans: B* | Vendor access = least privilege.

*Q45. Job Dependencies*  

Case: Report job runs before data load job finishes. Report is wrong.  

*Q:* Issue?  

A. No job scheduling dependency setup  

B. No change mgmt  

C. No BCP  

D. No SLA  

*Ans: A* | Job scheduler must enforce sequence.

*Q46. Log Retention*  

Case: System logs deleted after 7 days. Investigation needs 90-day log.  

*Q:* Gap?  

A. Log retention policy not aligned with need  

B. No encryption  

C. No backup  

D. No SLA  

*Ans: A* | Ops policy must meet audit/legal need.

*Q47. Single Point of Failure*  

Case: Only 1 person knows tape rotation process. He is on leave.  

*Q:* Risk?  

A. Availability risk due to key person dependency  

B. Confidentiality  

C. Integrity  

D. No risk  

*Ans: A* | Ops needs cross-training + docs.

*Q48. Preventive Maintenance*  

Case: UPS batteries never tested. Fail during outage.  

*Q:* Missing?  

A. Preventive maintenance schedule  

B. Backup  

C. Change mgmt  

D. SLA  

*Ans: A* | Ops = preventive maintenance.

*Q49. Service Catalog*  

Case: Users request services via email, phone, WhatsApp. No tracking.  

*Q:* Missing?  

A. Service catalog + request mgmt system  

B. Change mgmt  

C. BCP  

D. Capacity  

*Ans: A* | Standardize requests for tracking + SLA.

*Q50. Continuous Improvement*  

Case: Ops metrics collected but never reviewed by mgmt.  

*Q:* Missing?  

A. Metrics collection  

B. Management review + continuous improvement process  

C. Backup  

D. Change mgmt  

*Ans: B* | ITIL: collect → review → improve.

---

*Domain 5 Memory Rules for CISA*

1. *BIA first* → then RTO/RPO → then DR strategy  

2. *RTO = time to recover*, *RPO = data loss tolerance*  

3. *Hot > Warm > Cold* site for speed  

4. *Problem = root cause*, *Incident = symptom*  

5. *Emergency change* = allowed but must have post-review  

Absorption costing and Variable Costing

Absorption costing and Variable Costing

 *Absorption vs Variable Costing – Very Important Points* for CMA/CPA/CIMA 👇

*1. Basic Definition*

- *Absorption/Full Costing/Total costing*: Required by GAAP/IFRS for external reporting. Product cost /Inventoriable Costs/COGS = DM + DL + Variable mfg OH + *Fixed Mfg OH*. Fixed OH is “absorbed” into inventory.

- Volume based, It's tradional Costing system.

- *Variable/Direct/Marginal Costing*: Used for internal decision making. Product cost /Inventoriable Costs/COGS= DM + DL + Variable mfg OH only. *Fixed Mfg OH treated as period cost* and expensed immediately.

*2. Key Difference*

- *Treatment of Fixed Mfg OH* is the ONLY difference between both methods.

- All other costs treated same: DM, DL, Variable OH = product cost. _Selling/Admin_ = period cost in both.

*3. Profit Impact - Most Tested in Exams*

- *Production = Sales*: Profit same under both methods. No inventory change.

- *Production > Sales*: Inventory increases. *Absorption profit > Variable profit*. Reason: Some fixed OH deferred in ending inventory under absorption.

- *Sales > Production*: Inventory decreases. *Variable profit > Absorption profit*. Reason: Fixed OH from prior period inventory released to COGS under absorption.

- *Formula*: Difference in profit = Fixed OH rate per unit × Change in inventory units

Mfg fixed OH rate is callied as applied overhead or Overhead Absorption Rate=OAR=BUDGETED FIX MFG OH FOR THE PERIOD/ BUDGETED PRODUCTION QTTY.

*4. Income Statement Format*

- *Absorption*: Sales - COGS = *Gross Margin*. Then - Selling/Admin = Operating Income

- *Variable*: Sales - ALL Variable costs(MFG VARIABLE COST+NON MFG VARIABLE OH)= *Contribution Margin*. Then - Fixed costs(actual fix mfg OH+non mfg fixed OH)= Operating Income  

- Only variable costing gives contribution margin. CMA loves CVP + contribution format.

*5. Advantages/Disadvantages*

*Absorption Pros*:  

- GAAP/IFRS compliant. Matches fixed OH to revenue when sale happens  

- Shows full cost of production for pricing long-term  

*Absorption Cons*:  

- Managers may overproduce to boost profit by putting fixed OH into inventory  

- Not useful for CVP, make-buy, special order decisions  

*Variable Pros*:  

- Fixed cost clearly visible. No incentive to overproduce  

- Direct link to CVP analysis, BEP, contribution margin  

- Better for short-term decisions  

*Variable Cons*:  

- Not GAAP/IFRS compliant for external reports  

- Ignores fixed OH in inventory valuation  

*6. CMA/CPA Exam Traps*

- *Inventory valuation*: Absorption inventory higher by “Fixed OH rate × units in inventory”

- *Overhead volume variance*: Exists only in absorption costing. No variance in variable costing

- *Reconciliation*: Always reconcile: Absorption OI = Variable OI ± Fixed OH in inventory change

- *Decision making*: Use variable costing for special order, shutdown, product mix. Ignore fixed OH if unavoidable

www.gmsisuccess.in

For online exam software access click here link 🖇️ www finzo.pw

 based on the notes above, here are *10 MCQs with answers on Absorption vs Variable Costing* in CMA/CPA style:

*MCQs + Answers*

*1. Basic Definition*  

Under GAAP/IFRS, which costing method must be used for external financial reporting?  

A. Variable costing  

B. Direct costing  

C. Absorption costing  

D. Marginal costing  

*Answer: C. Absorption costing*  

Note: Only absorption includes Fixed Mfg OH in product cost.

*2. Key Difference*  

What is the ONLY difference between absorption and variable costing?  

A. Treatment of direct materials  

B. Treatment of selling/admin costs  

C. Treatment of fixed manufacturing OH  

D. Treatment of direct labor  

*Answer: C. Treatment of fixed manufacturing OH*  

Note: DM, DL, Variable OH = product cost in both. S&A = period cost in both.

*3. Profit Impact*  

Company produces 10,000 units, sells 8,000 units. Fixed Mfg OH = $200,000. Which statement is TRUE?  

A. Variable profit > Absorption profit  

B. Absorption profit > Variable profit  

C. Both profits equal  

D. Cannot determine  

*Answer: B. Absorption profit > Variable profit*  

Calc: Inventory ↑ by 2,000 units. Fixed OH deferred = $200,000/10,000 × 2,000 = $40,000. Absorption profit higher.

*4. Formula Application*  

Fixed Mfg OH $120,000. Budgeted production 12,000 units. Actual: produced 12,000, sold 9,000. Profit difference?  

A. $0  

B. $30,000 higher under variable  

C. $30,000 higher under absorption  

D. $120,000 higher under absorption  

*Answer: C. $30,000 higher under absorption*  

OH rate = 120,000/12,000 = $10/unit. Inventory ↑ = 3,000 units. Diff = 10 × 3,000 = $30,000.

*5. Income Statement Format*  

Which income statement shows “Contribution Margin”?  

A. Absorption costing only  

B. Variable costing only  

C. Both absorption and variable  

D. Neither  

*Answer: B. Variable costing only*  

Note: Absorption shows Gross Margin. Only variable shows CM = Sales – All variable costs.

*6. Inventory Valuation*  

Ending inventory = 5,000 units. Fixed OH rate = $6/unit. How much higher is absorption inventory vs variable inventory?  

A. $0  

B. $5,000  

C. $30,000  

D. $6/unit  

*Answer: C. $30,000*  

Absorption inventory = Variable inventory + 6 × 5,000 = +$30,000.

*7. Overhead Variance*  

Which variance exists only under absorption costing, not variable costing?  

A. Material price variance  

B. Labor efficiency variance  

C. Fixed overhead volume variance  

D. Variable overhead spending variance  

*Answer: C. Fixed overhead volume variance*  

Note: Volume variance occurs because fixed OH applied ≠ budgeted fixed OH when production ≠ denominator level.

*8. Decision Making*  

For a special order at price above variable cost but below full cost, which method should be used?  

A. Absorption costing, because it shows full cost  

B. Variable costing, because fixed OH is sunk  

C. Neither, reject all orders below full cost  

D. Absorption costing for external, variable for internal  

*Answer: B. Variable costing*  

Note: CMA trap: Use variable costing for short-term decisions. Fixed OH is unavoidable so irrelevant.

*9. Production = Sales*  

If production units = sales units, which is TRUE?  

A. Absorption profit > Variable profit  

B. Variable profit > Absorption profit  

C. Both profits equal  

D. Absorption COGS > Variable COGS  

*Answer: C. Both profits equal*  

Note: No inventory change → no fixed OH deferred/released.

*10. Reconciliation*  

Variable costing operating income = $80,000. Fixed OH rate = $4/unit. Beginning inventory 0, ending inventory 2,000 units. Absorption OI = ?  

A. $72,000  

B. $80,000  

C. $88,000  

D. $96,000  

*Answer: C. $88,000*  

Inventory ↑ → Absorption OI = Variable OI + Fixed OH deferred = 80,000 + 4×2,000 = $88,000.

*CMA Memory Rule*:  

“UP = Absorption UP, DOWN = Variable UP”  

Inventory UP → Absorption profit UP  

Inventory DOWN → Variable profit UP.