Practice is the single most effective way to prepare for the CPA Licensure Examination (CPALE). Answering multiple-choice questions under realistic conditions builds familiarity with how the Board of Accountancy frames its questions, sharpens your ability to identify distractors, and exposes gaps in your understanding before exam day.
This article provides free sample MCQs for all six CPALE subjects, updated for the 2026 exam cycle. Each question includes the correct answer and a brief explanation referencing current Philippine standards and regulations.
About the CPALE Format
Under BOA Resolution No. 30, Series of 2022, the CPALE consists of 450 MCQs administered over three days:
Each session lasts 4 hours. The passing score is 75% overall with no individual subject below 65%. All questions are four-option MCQs.
The questions below are representative of CPALE-level difficulty. Use them to gauge your readiness and identify which subjects need more review.
Financial Accounting and Reporting (FAR)
FAR covers Philippine Financial Reporting Standards (PFRS), Philippine Accounting Standards (PAS), and Philippine Interpretations — the foundation of financial accounting in the Philippines.
Question 1
An entity acquires equipment on January 1, 2026 for PHP 2,400,000 with an estimated useful life of 10 years and a residual value of PHP 400,000. The entity uses the straight-line method. On December 31, 2027, the entity determines that the recoverable amount of the equipment is PHP 1,600,000. What is the impairment loss to be recognized?
- A. PHP 0
- B. PHP 200,000
- C. PHP 400,000
- D. PHP 800,000
Answer: C. PHP 400,000
Explanation: Annual depreciation = (2,400,000 - 400,000) / 10 = PHP 200,000. After 2 years, accumulated depreciation = PHP 400,000. Carrying amount at December 31, 2027 = 2,400,000 - 400,000 = PHP 2,000,000. Since the recoverable amount (PHP 1,600,000) is less than the carrying amount (PHP 2,000,000), impairment loss = 2,000,000 - 1,600,000 = PHP 400,000, recognized per PAS 36 (Impairment of Assets).
Question 2
Under PFRS 15 (Revenue from Contracts with Customers), which of the following is NOT one of the five steps in recognizing revenue?
- A. Identify the contract with a customer
- B. Determine the transaction price
- C. Measure the fair value of consideration received
- D. Allocate the transaction price to performance obligations
Answer: C. Measure the fair value of consideration received
Explanation: The five steps under PFRS 15 are: (1) Identify the contract, (2) Identify performance obligations, (3) Determine the transaction price, (4) Allocate the transaction price, and (5) Recognize revenue when (or as) performance obligations are satisfied. "Measure fair value of consideration received" is not a step — PFRS 15 uses transaction price, not fair value of consideration, as the measurement basis.
Question 3
Entity A issues 10,000 ordinary shares with a par value of PHP 100 per share for PHP 150 per share. How should the excess over par be presented in the statement of financial position?
- A. Gain on issuance of shares in profit or loss
- B. Share premium in equity
- C. Other comprehensive income
- D. Liability for excess consideration
Answer: B. Share premium in equity
Explanation: Under PAS 1 and the Revised Corporation Code (RA 11232), the excess of issuance price over par value is credited to Share Premium (also called Additional Paid-in Capital), presented as a separate component of equity. It is not income — it represents a capital contribution from shareholders.
Advanced Financial Accounting and Reporting (AFAR)
AFAR covers business combinations, consolidation, partnerships, joint ventures, foreign currency transactions, government accounting, and not-for-profit accounting.
Question 4
On January 1, 2026, Parent Company acquires 80% of Subsidiary Company for PHP 4,000,000. On that date, the fair value of Subsidiary's identifiable net assets is PHP 4,500,000 and the fair value of the non-controlling interest is PHP 1,100,000. Under the full goodwill method (PFRS 3), what is the amount of goodwill?
- A. PHP 500,000
- B. PHP 600,000
- C. PHP 1,100,000
- D. PHP 0
Answer: B. PHP 600,000
Explanation: Under the full goodwill method per PFRS 3 (Business Combinations): Goodwill = (Consideration paid + Fair value of NCI) - Fair value of identifiable net assets = (4,000,000 + 1,100,000) - 4,500,000 = PHP 600,000. The full goodwill method recognizes goodwill attributable to both the parent and the NCI.
Question 5
Partners A, B, and C share profits and losses equally. Their capital balances are PHP 300,000, PHP 200,000, and PHP 100,000, respectively. Partner C retires and receives PHP 130,000. Under the bonus method, what are the capital balances of A and B after C's retirement?
- A. A: PHP 285,000; B: PHP 185,000
- B. A: PHP 300,000; B: PHP 200,000
- C. A: PHP 280,000; B: PHP 190,000
- D. A: PHP 290,000; B: PHP 180,000
Answer: A. A: PHP 285,000; B: PHP 185,000
Explanation: C receives PHP 130,000 but has only PHP 100,000 capital. The excess PHP 30,000 is a bonus to C, charged equally to A and B (since they share profits equally among themselves after C's retirement, i.e., 50:50). A's new capital = 300,000 - 15,000 = PHP 285,000. B's new capital = 200,000 - 15,000 = PHP 185,000.
Question 6
Under the Philippine Government Accounting Manual, what basis of accounting does the Philippine government use?
- A. Cash basis
- B. Modified cash basis
- C. Modified accrual basis
- D. Accrual basis
Answer: D. Accrual basis
Explanation: Per the Government Accounting Manual (GAM) for National Government Agencies and in accordance with Philippine Public Sector Accounting Standards (PPSAS), the Philippine government uses the accrual basis of accounting. Revenue is recognized when earned and expenses when incurred, regardless of when cash is received or paid.
Management Advisory Services (MAS)
MAS covers cost accounting, management accounting, financial management, and business strategy — the quantitative and analytical side of the CPA exam.
Question 7
A company produces a single product with a selling price of PHP 500 per unit, variable cost of PHP 300 per unit, and total fixed costs of PHP 1,000,000. How many units must the company sell to achieve a target profit of PHP 500,000?
- A. 5,000 units
- B. 7,500 units
- C. 10,000 units
- D. 3,333 units
Answer: B. 7,500 units
Explanation: Contribution margin per unit = 500 - 300 = PHP 200. Units for target profit = (Fixed costs + Target profit) / CM per unit = (1,000,000 + 500,000) / 200 = 7,500 units. This is a standard CVP (Cost-Volume-Profit) analysis application.
Question 8
Which of the following is NOT a relevant cost in a make-or-buy decision?
- A. Direct materials cost of making the component
- B. Allocated corporate office rent
- C. Variable overhead incurred only if the component is manufactured
- D. Opportunity cost of using factory space for an alternative purpose
Answer: B. Allocated corporate office rent
Explanation: Allocated corporate office rent is a common cost that will be incurred regardless of the make-or-buy decision — it is not avoidable and therefore not relevant. Relevant costs are future costs that differ between alternatives. Direct materials, variable overhead specific to manufacturing, and opportunity costs all meet this criterion.
Question 9
A company's current ratio is 2.5:1 and its quick ratio is 1.2:1. If current liabilities are PHP 800,000, what is the value of inventory?
- A. PHP 960,000
- B. PHP 1,040,000
- C. PHP 1,200,000
- D. PHP 2,000,000
Answer: B. PHP 1,040,000
Explanation: Current assets = Current ratio x Current liabilities = 2.5 x 800,000 = PHP 2,000,000. Quick assets = Quick ratio x Current liabilities = 1.2 x 800,000 = PHP 960,000. Inventory = Current assets - Quick assets = 2,000,000 - 960,000 = PHP 1,040,000. (Quick assets exclude inventory and prepaid expenses from current assets.)
Auditing
Auditing covers Philippine Standards on Auditing (PSA), Philippine Standards on Review Engagements (PSRE), Philippine Standards on Assurance Engagements (PSAE), and the Code of Ethics for Professional Accountants in the Philippines.
Question 10
Under PSA 700 (Revised), what type of opinion should the auditor express when the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework?
- A. Qualified opinion
- B. Adverse opinion
- C. Unmodified opinion
- D. Disclaimer of opinion
Answer: C. Unmodified opinion
Explanation: Per PSA 700 (Revised), an unmodified (clean) opinion is expressed when the auditor concludes that the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework. Modified opinions (qualified, adverse, disclaimer) are issued only when specific conditions per PSA 705 are met.
Question 11
An auditor discovers that management has intentionally misstated revenue figures to inflate earnings. Under PSA 240, this is an example of:
- A. Error
- B. Fraud
- C. Non-compliance with laws and regulations
- D. Irregularity in sampling
Answer: B. Fraud
Explanation: PSA 240 (The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements) distinguishes between fraud and error based on intent. Intentional misstatement of financial statements is fraudulent financial reporting — one of the two types of fraud relevant to auditors (the other being misappropriation of assets). Errors, by contrast, are unintentional misstatements.
Question 12
Which of the following is the most appropriate audit procedure to test the existence assertion for accounts receivable?
- A. Inspect the aged trial balance
- B. Send positive confirmations to selected customers
- C. Vouch sales invoices to shipping documents
- D. Examine subsequent cash collections
Answer: B. Send positive confirmations to selected customers
Explanation: External confirmation (per PSA 505) is considered highly reliable audit evidence because it is obtained directly from third parties. Positive confirmations ask customers to respond regardless of whether they agree with the stated balance. This directly tests whether the receivable exists and is owed by the customer. While examining subsequent cash collections (D) also provides evidence of existence, confirmation is the most direct and commonly tested procedure for this assertion.
Taxation
Taxation covers the National Internal Revenue Code (NIRC) as amended by the TRAIN Law (RA 10963) and the CREATE MORE Act (RA 12066), BIR regulations, local taxation, and tax remedies.
Question 13
Under the TRAIN Law, what is the individual income tax rate for taxable income exceeding PHP 8,000,000?
- A. 30%
- B. 32%
- C. 35%
- D. 25%
Answer: C. 35%
Explanation: Under the TRAIN Law (RA 10963), effective January 1, 2023, the graduated income tax rates for individuals top out at 35% for taxable income over PHP 8,000,000. The old highest bracket of 32% was replaced by the TRAIN Law's revised graduated rates.
Question 14
ABC Corporation, a domestic corporation, had a net taxable income of PHP 10,000,000 for taxable year 2025. Under the CREATE MORE Act, what is the regular corporate income tax (RCIT) due?
- A. PHP 2,000,000
- B. PHP 2,500,000
- C. PHP 3,000,000
- D. PHP 3,500,000
Answer: B. PHP 2,500,000
Explanation: Under the CREATE Law (RA 11534), effective July 1, 2020, the regular corporate income tax rate for domestic corporations was reduced from 30% to 25%. RCIT = 10,000,000 x 25% = PHP 2,500,000. Note: Domestic corporations with net taxable income not exceeding PHP 5,000,000 AND total assets not exceeding PHP 100,000,000 qualify for the reduced rate of 20%.
Question 15
Which of the following is subject to Value-Added Tax (VAT) at 12%?
- A. Sale of raw food items for human consumption
- B. Sale of educational services by proprietary educational institutions
- C. Lease of commercial property with monthly rental of PHP 20,000
- D. Sale of residential lot valued at PHP 1,500,000
Answer: C. Lease of commercial property with monthly rental of PHP 20,000
Explanation: Lease of commercial property is subject to 12% VAT provided the lessor exceeds the PHP 3,000,000 VAT registration threshold. The PHP 15,000 monthly rental threshold for VAT exemption applies only to residential unit leases per NIRC Section 109(1)(P) as amended by the TRAIN Law. Raw food items for human consumption are VAT-exempt. Educational services by proprietary educational institutions are VAT-exempt. Sale of residential lots is VAT-exempt if the selling price does not exceed PHP 1,919,500 (for lots only; the higher PHP 3,199,200 threshold applies to house and lot or condominium units).
Regulatory Framework for Business Transactions (RFBT)
RFBT is the broadest CPALE subject, covering the Revised Corporation Code (RA 11232), Negotiable Instruments Law (Act No. 2031), Civil Code obligations and contracts, law on partnerships, law on sales, and various regulatory laws.
Question 16
Under the Revised Corporation Code (RA 11232), what is the minimum number of incorporators required to form a stock corporation?
- A. 1
- B. 2
- C. 5
- D. 15
Answer: A. 1
Explanation: One of the major changes introduced by the Revised Corporation Code (RA 11232, effective February 23, 2019) is that a corporation can now be formed by a single incorporator — the One Person Corporation (OPC). This was a departure from the old Corporation Code (BP 68), which required a minimum of 5 incorporators. For regular stock corporations, the minimum is now 2 incorporators, but the existence of OPCs means the absolute minimum is 1.
Question 17
Under the Negotiable Instruments Law (NIL), which of the following is NOT a requirement for an instrument to be negotiable?
- A. It must be in writing and signed by the maker or drawer
- B. It must contain an unconditional promise or order to pay a sum certain in money
- C. It must be payable to order or to bearer
- D. It must state the consideration for which it was issued
Answer: D. It must state the consideration for which it was issued
Explanation: Section 1 of the Negotiable Instruments Law (Act No. 2031) requires that a negotiable instrument: (1) be in writing and signed, (2) contain an unconditional promise or order to pay a sum certain in money, (3) be payable on demand or at a determinable future time, and (4) be payable to order or to bearer. Stating the consideration is NOT required — consideration is presumed under the NIL.
Question 18
A contract of sale is perfected when there is consent, a determinate subject matter, and a price certain in money or its equivalent. Under the Civil Code, if the price is simulated (fictitious), the sale is:
- A. Valid
- B. Voidable
- C. Void
- D. Unenforceable
Answer: C. Void
Explanation: Under Article 1471 of the Civil Code of the Philippines, if the price in a contract of sale is simulated, the sale is void. Price is an essential element of sale — if it is fictitious, there is no real price, and therefore no valid contract of sale exists. However, the act may be shown to have been a donation or some other contract if the requisites thereof are present.
Question 19
Under the Anti-Money Laundering Act (AMLA), as amended by RA 11521, what is the threshold amount for covered transaction reporting by covered institutions?
- A. PHP 100,000
- B. PHP 500,000
- C. PHP 1,000,000
- D. PHP 5,000,000
Answer: B. PHP 500,000
Explanation: Under the AMLA as amended, covered institutions (including banks, insurance companies, and securities dealers) must report covered transactions — single transactions in cash or equivalent exceeding PHP 500,000 — to the Anti-Money Laundering Council (AMLC) within five working days. Suspicious transactions must be reported regardless of amount.
How to Use These Practice Questions Effectively
Answering sample questions is only valuable if you learn from them. Here are tips for maximizing your practice:
1. Simulate Exam Conditions
Do not look at the answers immediately. Set a timer, answer all questions in a subject block, and only then check your answers. The CPALE gives you approximately 3.4 minutes per question — practice working within that pace.
2. Analyze Your Mistakes
For every question you get wrong, write down:
- What you thought the answer was and why
- What the correct answer is and why
- What concept or standard you need to review
This error analysis is where the real learning happens.
3. Review the Standards, Not Just the Answers
If a question references PFRS 15 or PSA 700, take the time to read the relevant standard. Understanding the source material builds a deeper foundation than memorizing individual answers.
4. Track Your Performance by Subject
Keep a simple record of your accuracy per subject. If you are scoring below 70% in Taxation but above 85% in FAR, your study time allocation should reflect that gap.
5. Practice Regularly
Research on memory consistently shows that distributed practice (studying a little every day) is far more effective than massed practice (cramming). Aim for at least 20-30 practice questions daily across different subjects.
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Start your free trial and access our full question bank. Your CPALE preparation deserves more than sample questions — it deserves a complete system.
Sources
- BOA Resolution No. 30, Series of 2022 - CPALE exam structure
- Philippine Financial Reporting Standards (PFRS) as adopted by the FRSC
- Philippine Standards on Auditing (PSA) as issued by the AASC
- National Internal Revenue Code (NIRC) as amended by RA 10963 (TRAIN Law) and RA 11534 (CREATE Law)
- Revised Corporation Code of the Philippines (RA 11232)
- Negotiable Instruments Law (Act No. 2031)
- Civil Code of the Philippines (RA 386)
- Anti-Money Laundering Act as amended by RA 11521
Last updated: February 2026. Questions are based on standards and regulations in effect as of this date.