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Home > College Board Tests > CLEP: Exam Descriptions > Principles of Accounting

Principles of Accounting

This exam will no longer be available after June 30, 2007. It will be replaced by CLEP Financial Accounting.

Description of the Examination

The Principles of Accounting examination covers the information and skills taught in two semesters (or the equivalent) of college-level accounting. The emphasis of the exam is on financial and managerial accounting. Colleges may award credit for a one- or two-semester course in financial accounting including some managerial accounting topics, or for one semester of financial accounting and one semester of managerial accounting.

The examination contains 78 questions to be answered in 90 minutes. Any time candidates spend on tutorials or providing personal information is in addition to the actual testing time.

Knowledge and Skills Required

Questions on the Principles of Accounting examination require candidates to demonstrate one or more of the following abilities:

  • Familiarity with accounting concepts and terminology
  • Preparation, use, and analysis of accounting data and financial reports issued for both internal and external purposes
  • Application of accounting techniques to simple problem situations involving computations
  • Understanding the rationale for generally accepted accounting principles and procedures

The subject matter of the Principles of Accounting examination is drawn from the following topics. The percentages next to the main topics indicate the approximate percentages of exam questions on those topics.

Approximate Percent of Examination

60-70%     Financial accounting
(concerned with providing financial statements and reports of interest to company managers as well as bankers, investors, and other outsiders who must make a financial assessment of a company)
  • Generally accepted accounting principles
  • Rules of double-entry accounting
  • The accounting cycle
  • Presentation of and relationships between general-purpose financial statements
  • Valuation of accounts and notes receivable
  • Valuation of inventories
  • Initial costs of plant assets
  • Depreciation
  • Liabilities
  • Investments
  • Capital
  • Cash and stock dividends
  • Treasury stock
  • Purchase and sale of merchandise
  • Revenue and cost apportionments
  • Cash control
  • Division of profits and losses in partnership accounting
  • Cash flow analysis
30-40% Managerial accounting
(concerned with the use of accounting data for internal purposes to help management in planning and controlling functions in a company)
  • Analysis of departmental operations
  • Budgeting
  • Cost-volume profit (break-even) analysis
  • Direct costing and absorption costing
  • Financial statement analysis
  • Performance evaluation
  • Process and job-order systems
  • Standard costs and variances
  • The manufacturing environment
  • Use of differential (relevant) cost

Study resources

Most textbooks used in the first semesters of college-level accounting courses cover the topics in the outline given earlier, but the approaches to certain topics and the emphasis given to them may differ. To prepare for the Principles of Accounting exam, it is advisable to study one or more college textbooks, which can be found in most college bookstores. When selecting a textbook, check the table of contents against the "Knowledge and Skills Required" for this test.