FAR topic guide

Leases explained for FAR CPA candidates.

Lease questions often test whether you understand the asset, liability, classification, and expense pattern rather than only memorizing labels.

Practice FAR questions CPA sections

By World of Accountants editorial team. Last reviewed August 23, 2026. World of Accountants is independent and not affiliated with the AICPA, NASBA, Becker, NINJA, UWorld, Gleim, or other CPA review providers.

FAR sample question

Test the rule before you leave this FAR guide.

Read the topic explanation, then use this real FAR question to check whether the controlling fact is sticking.

FAR-000001FAR-IRevenue recognition

During the year-end close for a manufacturer, an entity receives an advance payment for goods it has not yet shipped. What should be recorded initially?

A.A contract liability should be recorded until the promised goods are transferred.
B.Revenue should be recognized immediately for the full cash receipt
C.A receivable should be recorded even though cash was received
D.No liability should be recorded until shipment because the performance obligation has not yet been satisfied

Answer: A. A contract liability should be recorded until the promised goods are transferred.

A contract liability should be recorded until the promised goods are transferred.

Why the other answers are wrong

B. Cash collection alone does not establish revenue recognition. Because the goods have not been transferred, the receipt creates an obligation to perform.
C. A receivable is not the right starting point because the entity already received cash. The unresolved issue is the obligation to deliver goods.
D. This choice notices that performance has not occurred, but reaches the wrong accounting result. The unperformed obligation is exactly why a contract liability is recorded.

Core idea

A lessee generally recognizes a right-of-use asset and a lease liability when a contract conveys the right to control the use of an identified asset for a period of time.

What FAR likes to test

Watch for lease term, purchase options, present value, transfer of ownership, and whether the facts change classification or measurement.

Common miss

Candidates often jump to rent expense without first asking whether the arrangement creates a right-of-use asset and lease liability.

How to practice

Work one lease question at a time, write the fact that controls the answer, then compare your reasoning with the explanation.

How to use this guide

Turn leases explained for far cpa candidates into a short practice loop.

Read the core idea first, then answer a small set while the rule is still active in your head. The goal is to see whether you can recognize the tested fact without rereading the guide.

Spot the tested fact

Before choosing an answer, name the one fact that should control the result. FAR questions often become easier once the controlling fact is separated from background detail.

Explain the distractor

When an answer is wrong, say why it is wrong in one sentence. That habit turns answer review into durable exam judgment instead of memorizing a letter.

Retest later

Bookmark misses and revisit them after another study session. A topic is stronger when you can recover it after time has passed.

FAR topic guides

Keep going with related FAR topics.

FARRevenue recognition for FAR CPA candidates

Performance obligations, transaction price, allocation, timing, and cash-vs-revenue mistakes.

FARBonds payable for FAR CPA candidates

Discounts, premiums, carrying amount, effective interest, and extinguishment basics.

FARHow many FAR questions should you do before exam day?

A practical way to think about FAR question volume, review quality, and readiness.

FARStatement of cash flows for FAR CPA candidates

Operating, investing, financing, indirect method adjustments, and classification traps.

FARGovernmental accounting for FAR CPA candidates

Fund types, modified accrual, government-wide statements, and reconciliation logic.

FARConsolidations for FAR CPA candidates

Acquisition method, eliminating entries, noncontrolling interest, and intercompany transactions.

AUD / FAR / REG / BAR / ISC / TCPHard CPA practice questions for exam-like review

Hard CPA questions across all six sections with explanations and review tools.

AUD / FAR / REG / BAR / ISC / TCPCPA practice test-style MCQ sets

Build a practice test-style MCQ set with explanations and section filters.

Practice loop

Use the topic, then answer questions while the idea is fresh.

Short practice sets are enough to expose whether the rule is sticking.

Practice FAR questions