CAP Accounting Paraprofessional Skills and Knowledge Covered 2 — Questions and Answers
Question 1: When reconciling a bank statement, which item would appear as an outstanding check on the book side?
- A check written by the company but not yet cleared the bank (Correct answer)
- A deposit made by the bank but not recorded by the company
- A bank service charge not yet recorded in the books
- A check received from a customer but not yet deposited
Correct answer: A check written by the company but not yet cleared the bank
Outstanding checks are written and recorded by the company but have not yet been processed by the bank.
Question 2: Which inventory costing method assumes the most recently purchased items are sold first?
- FIFO
- LIFO (Correct answer)
- Weighted Average
- Specific Identification
Correct answer: LIFO
LIFO (Last-In, First-Out) assumes the most recently purchased inventory is sold first.
Question 3: A petty cash fund is established for $200. After replenishment, the cashier should have receipts and cash totaling:
- More than $200
- Less than $200
- Exactly $200 (Correct answer)
- Whatever amount was originally spent
Correct answer: Exactly $200
The petty cash fund is always restored to its established amount, so the total of cash plus receipts always equals $200.
Question 4: Which of the following is an example of a variable cost for a business?
- Monthly lease payment for office space
- Annual insurance premium
- Raw materials used in production (Correct answer)
- Salaries of permanent staff
Correct answer: Raw materials used in production
Raw materials vary directly with production volume, making them a classic variable cost.
Question 5: Accounts receivable turnover is calculated as:
- Net credit sales divided by average accounts receivable (Correct answer)
- Total sales divided by ending accounts receivable
- Average accounts receivable divided by net credit sales
- Net income divided by accounts receivable
Correct answer: Net credit sales divided by average accounts receivable
Accounts receivable turnover = Net Credit Sales ÷ Average Accounts Receivable, measuring how efficiently a firm collects receivables.
Question 6: When a company receives a prepayment from a customer, the correct journal entry is to:
- Debit Revenue and credit Cash
- Debit Cash and credit Unearned Revenue (Correct answer)
- Debit Accounts Receivable and credit Revenue
- Debit Unearned Revenue and credit Accounts Receivable
Correct answer: Debit Cash and credit Unearned Revenue
A customer prepayment creates a liability (Unearned Revenue) until the service or product is delivered.
Question 7: Which financial statement shows a company's financial position at a specific point in time?
- Income Statement
- Statement of Cash Flows
- Balance Sheet (Correct answer)
- Statement of Retained Earnings
Correct answer: Balance Sheet
The Balance Sheet reports assets, liabilities, and equity as of a specific date, reflecting the company's financial position at that moment.
CAP Accounting Paraprofessional Skills and Knowledge Covered 2
When reconciling a bank statement, which item would appear as an outstanding check on the book side?