ABA Bookkeeping & General Ledger 2 — Questions and Answers
Question 1: Which of the following best describes a subsidiary ledger?
- A summary ledger that contains all account balances
- A detailed ledger that supports a control account in the general ledger (Correct answer)
- A ledger used only for payroll transactions
- A temporary ledger closed at year-end
Correct answer: A detailed ledger that supports a control account in the general ledger
A subsidiary ledger provides detailed records that support and reconcile to a control account in the general ledger.
Question 2: When a company receives payment in advance for services not yet performed, the initial journal entry is:
- Debit Cash, Credit Service Revenue
- Debit Unearned Revenue, Credit Cash
- Debit Cash, Credit Unearned Revenue (Correct answer)
- Debit Accounts Receivable, Credit Service Revenue
Correct answer: Debit Cash, Credit Unearned Revenue
Cash received before services are rendered is a liability (Unearned Revenue), so Cash is debited and Unearned Revenue is credited.
Question 3: What is the purpose of a trial balance?
- To prepare financial statements
- To verify that total debits equal total credits in the ledger (Correct answer)
- To record adjusting entries
- To close temporary accounts
Correct answer: To verify that total debits equal total credits in the ledger
A trial balance lists all ledger accounts and their balances to confirm that total debits equal total credits after posting.
Question 4: Under the accrual basis, revenue is recognized when:
- Cash is collected from the customer
- The invoice is mailed to the customer
- It is earned, regardless of when cash is received (Correct answer)
- The accounting period ends
Correct answer: It is earned, regardless of when cash is received
Accrual accounting recognizes revenue when earned (performance obligation met), not when cash changes hands.
Question 5: A bookkeeper notices that a $500 credit was posted to Accounts Payable but should have gone to Notes Payable. This error is called a:
- Error of omission
- Error of principle
- Error of commission (Correct answer)
- Compensating error
Correct answer: Error of commission
An error of commission occurs when an entry is made to the correct side but the wrong account of the same category.
Question 6: Which account would be found in the accounts payable subsidiary ledger?
- Individual vendor balances (Correct answer)
- Individual customer balances
- Bank account details
- Depreciation schedules
Correct answer: Individual vendor balances
The accounts payable subsidiary ledger contains a separate record for each vendor showing amounts owed.
Question 7: The entry to record depreciation expense for the period is:
- Debit Accumulated Depreciation, Credit Depreciation Expense
- Debit Depreciation Expense, Credit Accumulated Depreciation (Correct answer)
- Debit Asset Account, Credit Depreciation Expense
- Debit Depreciation Expense, Credit Asset Account
Correct answer: Debit Depreciation Expense, Credit Accumulated Depreciation
Depreciation Expense is debited and Accumulated Depreciation (a contra-asset) is credited to allocate asset cost over its useful life.
ABA Bookkeeping & General Ledger 2
Which of the following best describes a subsidiary ledger?