Bookkeeping Basic Test #2

Question 1

Which entity's transactions are recorded in bookkeeping?

Accepted Answer

Business

Answer

According to the accounting entity concept, a business is treated as a separate and distinct entity from its owners for accounting purposes. Therefore, bookkeeping records only the financial transactions that pertain directly to the business itself. This ensures that the financial performance and position of the business are clearly and accurately reported, separate from the personal finances of its owners.

Question 2

Is this statement true or false? For the following transaction, this is an accurate journal entry: A customer makes a $250.00 payment on their account. Credit – Accounts Payable – $250.00 Debit – Income – $250.00

Accepted Answer

False

Answer

The provided journal entry is incorrect. When a customer makes a payment on their account, it means they are paying off an Accounts Receivable (money owed to the business), not Accounts Payable (money the business owes). The correct entry would be to debit Cash (increasing cash) and credit Accounts Receivable (decreasing the amount owed by the customer), as the customer's debt is settled.

Question 3

What phrase is used to describe the usage of debits and credits to record a transaction in accounting records?

Accepted Answer

An entry

Answer

In accounting, the act of recording a business transaction using debits and credits in the journal is referred to as making an 'entry' or a 'journal entry.' This term encompasses the entire process of documenting the financial event in the accounting records. Each entry ensures that the fundamental accounting equation remains balanced.

Question 4

Which of the following accounts would be considered a debit?

Accepted Answer

Net Loss

Answer

Accounts that are considered 'debit' accounts are those that typically have a debit balance or increase with a debit entry. Assets (like Beginning Inventory) and Expenses fall into this category. A Net Loss, while not a standalone account, ultimately reduces owner's equity, which is achieved through a debit to the Retained Earnings account during the closing process, thus having a debit effect on equity.

Question 5

What is the term for the amount of time it takes to produce a set of financial statements?

Accepted Answer

An Accounting Period

Answer

An accounting period is a specific, defined length of time for which a company prepares its financial statements. This period can be a month, quarter, or a full year, allowing businesses to regularly measure their financial performance and position. Dividing operations into these periods ensures timely reporting and analysis of financial data.

CPB / BookKeeping Practice Test

CPB / BookKeeping Practice Test

Bookkeeping Basic Test #2