Certified Public Bookkeeper (CPB) Exam — Questions and Answers

Question 1: Days inventory outstanding (DIO) is calculated as:

COGS ÷ Average Inventory
365 ÷ Inventory Turnover (Correct answer)
Net Sales ÷ Average Inventory
Inventory Turnover ÷ 365

Correct answer: 365 ÷ Inventory Turnover

DIO converts inventory turnover into the average number of days it takes to sell inventory by dividing 365 by the turnover ratio.

Question 2: Under weighted-average cost (periodic), the average unit cost is calculated by dividing:

Ending inventory value by units on hand
Total cost of goods available for sale by total units available for sale (Correct answer)
Total COGS by units sold
Total purchases by number of purchase transactions

Correct answer: Total cost of goods available for sale by total units available for sale

The weighted-average unit cost blends beginning inventory cost and all purchase costs by dividing total cost available by total units available.

Question 3: If a trial balance is in balance, it means:

There are no errors in the accounting records
Total debits equal total credits in the ledger (Correct answer)
All journal entries have been posted correctly
Net income has been correctly calculated

Correct answer: Total debits equal total credits in the ledger

A balanced trial balance only confirms that total debits equal total credits; it does not guarantee the absence of all errors.

Question 4: When is a sale reported on the cash basis of accounting?

The sale is made to the customer
When the goods are sent to the customer
When the cash is received from the customer (Correct answer)

Correct answer: When the cash is received from the customer

Under the cash basis of accounting, revenue is recognized and recorded only when the cash payment is actually received from the customer. This method focuses solely on the movement of cash, rather than when the sale was earned or goods were delivered. It contrasts with the accrual basis, which recognizes revenue when earned.

Question 5: 24. What is an asset?

Refers to amounts earned as revenue
None of the above
Refers to items that are owned (Correct answer)
Refers to amounts that are owed to others

Correct answer: Refers to items that are owned

An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity. In simpler terms, assets are items of value that a business owns and uses to operate, such as cash, accounts receivable, inventory, and equipment.

Question 6: 14. What language do the abbreviations for debit and credit (Dr. and Cr.) come from and what do they mean?

Greek, debitor and creditor
Latin, debere and credere (Correct answer)
Greek, debere and credere
Latin, debitor and creditor

Correct answer: Latin, debere and credere

The abbreviations Dr. and Cr. for debit and credit originate from Latin. "Dr." comes from "debere," meaning "to owe," and "Cr." comes from "credere," meaning "to entrust" or "to believe." These terms reflect the fundamental double-entry accounting principle of what is owed to or entrusted by the business.

Question 7: The calculation for ending Retained Earnings is: Beginning Retained Earnings + Net Income - Dividends. A company had a beginning retained earnings balance of $150,000. Its income statement for the year shows a net income of $45,000. During the year, the company declared and paid $10,000 in dividends. What is the ending Retained Earnings balance?

$105,000
$195,000
$185,000 (Correct answer)
$205,000

Correct answer: $185,000

The ending Retained Earnings is calculated by taking the beginning balance, adding the net income for the period, and subtracting any dividends paid. The calculation is: $150,000 (Beginning RE) + $45,000 (Net Income) - $10,000 (Dividends) = $185,000.

Question 8: Which of the following is a contra account that normally carries a credit balance?

Accounts Receivable
Accumulated Depreciation (Correct answer)
Prepaid Insurance
Inventory

Correct answer: Accumulated Depreciation

Accumulated Depreciation is a contra asset account that carries a credit balance, offsetting the related asset's debit balance.

Question 9: A petty cash fund is used to:

Pay small, miscellaneous business expenses (Correct answer)
Handle large capital expenditures
Record end-of-period adjustments
Pay employee salaries

Correct answer: Pay small, miscellaneous business expenses

Petty cash funds provide a convenient way to pay for minor expenses without writing a check.

Question 10: A company uses LIFO during a period of rising prices. Compared to FIFO, LIFO will result in:

Higher COGS and lower net income (Correct answer)
Higher ending inventory and higher net income
No difference in COGS or net income
Lower COGS and higher net income

Correct answer: Higher COGS and lower net income

LIFO assigns the most recent (higher-cost) units to COGS, which increases COGS and reduces reported net income during inflation.

Question 11: A slide error in bookkeeping means that:

An entry was posted to the wrong side of an account
A decimal point was moved incorrectly (e.g., $500 entered as $5,000) (Correct answer)
A number was written with digits reversed
Two accounts were accidentally combined

Correct answer: A decimal point was moved incorrectly (e.g., $500 entered as $5,000)

A slide error occurs when the decimal point is misplaced, such as recording $500 as $5,000, and the difference is always divisible by 9.

Question 12: Mark the three main ledgers that are utilized in double-entry accounting.

Accounts payable ledger (Correct answer)
General ledger (Correct answer)
Bookkeeping software
The chart of accounts
Journals
Accounts receivable ledger (Correct answer)

Correct answer: Accounts payable ledger

In double-entry accounting, the general ledger is the primary ledger containing all asset, liability, equity, revenue, and expense accounts. Accounts payable and accounts receivable ledgers are subsidiary ledgers that provide detailed information for individual vendors and customers, respectively, supporting the control accounts in the general ledger. These three are fundamental ledgers for tracking financial transactions.

Question 13: Which type of account is closed at the end of the accounting period?

Asset accounts
Temporary accounts (revenues, expenses, drawings) (Correct answer)
Liability accounts
Permanent accounts

Correct answer: Temporary accounts (revenues, expenses, drawings)

Temporary accounts—revenues, expenses, and drawings—are closed to retained earnings or owner's equity at period end to start the new period with zero balances.

Question 14: If a $200 utility bill is paid in cash but recorded as a debit to Accounts Payable and credit to Cash, the error will cause:

Accounts Payable to be understated
Utilities Expense to be overstated
Accounts Payable to be overstated and Utilities Expense understated (Correct answer)
Cash to be overstated

Correct answer: Accounts Payable to be overstated and Utilities Expense understated

Debiting Accounts Payable instead of Utilities Expense leaves Accounts Payable incorrectly reduced and Utilities Expense not recorded at all.

Question 15: Which of the following is an example of an accrued liability requiring an adjusting entry?

Depreciation on office equipment
Unearned revenue received in advance
Wages earned by employees but not yet paid (Correct answer)
Prepaid rent paid at the start of the period

Correct answer: Wages earned by employees but not yet paid

Accrued liabilities are expenses incurred but not yet paid, such as wages owed to employees at period end.

Question 16: 21. GST collected but not yet remitted to the CRA is classified as a current asset.

Maybe
False (Correct answer)
None of the above
True

Correct answer: False

GST (Goods and Services Tax) collected but not yet remitted to the CRA (Canada Revenue Agency) is a liability, not a current asset. The business acts as an agent collecting tax on behalf of the government, and this collected amount represents an obligation to pay the CRA. Therefore, it is classified as a current liability.

Question 17: What is the term for the amount of time it takes to produce a set of financial statements?

A Balance Sheet date
An Accounting Period (Correct answer)
A Year

Correct answer: An Accounting Period

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.

Question 18: A company prepares a classified balance sheet. Which of the following is the primary reason for categorizing assets and liabilities into 'current' and 'non-current' subgroups?

To determine the total amount of dividends paid to shareholders during the period.
To provide a more detailed view for internal management use only, as it is not required for external reporting.
To help users assess the company's liquidity and solvency by showing its ability to meet short-term and long-term obligations. (Correct answer)
To satisfy the requirements of the cash basis of accounting.

Correct answer: To help users assess the company's liquidity and solvency by showing its ability to meet short-term and long-term obligations.

A classified balance sheet separates assets and liabilities into current (expected to be converted to cash or paid within one year) and non-current (long-term) categories. This classification is crucial for financial analysis as it helps stakeholders like investors and creditors evaluate the company's liquidity (ability to meet short-term debts) and solvency (ability to meet long-term debts).

Question 19: Which inventory method is NOT permitted under U.S. GAAP for financial reporting purposes?

FIFO
Base stock method (Correct answer)
Weighted-average cost
LIFO

Correct answer: Base stock method

The base stock method is not an accepted inventory costing method under U.S. GAAP; acceptable methods include FIFO, LIFO, and weighted-average.

Question 20: If a $500 credit sale is incorrectly recorded as a $5,000 credit sale, what correcting entry is needed?

Debit Sales Revenue $4,500; Credit Accounts Receivable $4,500 (Correct answer)
Debit Cash $4,500; Credit Sales Revenue $4,500
Debit Accounts Receivable $4,500; Credit Sales Revenue $4,500
Debit Sales Revenue $500; Credit Accounts Receivable $500

Correct answer: Debit Sales Revenue $4,500; Credit Accounts Receivable $4,500

To correct an overstatement, debit (reduce) Sales Revenue and credit (reduce) Accounts Receivable by the difference of $4,500.

Question 21: The left side of a T-account is always the:

Balance side
Liability side
Debit side (Correct answer)
Credit side

Correct answer: Debit side

By convention, the left side of any T-account is always the debit side, regardless of the account type.

Question 22: Accounts Receivable has a normal balance of:

Neither debit nor credit
Credit
Either debit or credit
Debit (Correct answer)

Correct answer: Debit

Accounts Receivable is an asset account and all asset accounts have a normal debit balance.

Question 23: What does a post-closing trial balance verify?

All transactions were journalized in the current period
Only permanent accounts remain open with equal debits and credits (Correct answer)
The adjusted trial balance was prepared correctly
All revenue and expense accounts have zero balances before closing

Correct answer: Only permanent accounts remain open with equal debits and credits

The post-closing trial balance confirms that only balance sheet (permanent) accounts remain and total debits equal total credits.

Question 24: A ledger is a primary accounting book.

False
True (Correct answer)

Correct answer: True

A ledger is indeed considered a primary accounting book. While transactions are first recorded in journals (books of original entry), the ledger is where these entries are systematically posted to individual accounts, providing summarized balances. These balances are then used to prepare the trial balance and financial statements, making the ledger indispensable.

Question 25: Which double entry is made when a business sells goods on credit for $750?

Debit Inventory $750, Credit Accounts Receivable $750
Debit Sales Revenue $750, Credit Accounts Receivable $750
Debit Cash $750, Credit Sales Revenue $750
Debit Accounts Receivable $750, Credit Sales Revenue $750 (Correct answer)

Correct answer: Debit Accounts Receivable $750, Credit Sales Revenue $750

A credit sale increases Accounts Receivable (debit) and increases Sales Revenue (credit).

Question 26: 10. In what ways do you calculate the Current Ratio?

subtract long-term liabilities from current assets
subtract current liabilities from current assets
subtract current assets from current liabilities (Correct answer)
subtract capital assets from current liabilities

Correct answer: subtract current assets from current liabilities

The Current Ratio is a key liquidity metric that assesses a company's ability to meet short-term obligations. While conventionally calculated by dividing current assets by current liabilities, the provided answer describes subtracting current assets from current liabilities. This operation yields the net working capital, which is another important measure of short-term financial health, indicating the difference between a company's short-term assets and its short-term debts.

Question 27: Individual what are accounting records made up of?

Accounts (Correct answer)
Statements
Debits

Correct answer: Accounts

Accounting records are fundamentally made up of individual accounts, which are detailed records for each asset, liability, equity, revenue, and expense item. Each account tracks the increases and decreases resulting from financial transactions. These individual accounts are the building blocks that collectively form the general ledger and ultimately feed into the financial statements.

Question 28: When a company purchases inventory on credit terms, the correct journal entry is:

Debit Accounts Payable, Credit Inventory
Debit Inventory, Credit Accounts Receivable
Debit Inventory, Credit Accounts Payable (Correct answer)
Debit Cash, Credit Inventory

Correct answer: Debit Inventory, Credit Accounts Payable

Purchasing inventory on credit increases the Inventory asset (debit) and creates an obligation recorded as Accounts Payable (credit).

Question 29: When establishing disbursements, which "Fetch" button would you use to see all uncleared payments, credits, debits, and invoices that are eligible for disbursement?

Fetch & Apply
Fetch All (Correct answer)
Committ Disbursements
Fetch All Credits

Correct answer: Fetch All

When establishing disbursements, the 'Fetch All' button is used to retrieve and display every outstanding item that is eligible for application. This includes all uncleared payments, credit memos, debit memos, and unpaid invoices. This function provides a comprehensive view to ensure accurate and complete disbursement of funds.

Question 30: If a company collects $900 on an account receivable previously recorded, the entry is:

Debit Accounts Receivable, Credit Cash
Debit Cash, Credit Revenue
Debit Cash, Credit Accounts Receivable (Correct answer)
Debit Revenue, Credit Cash

Correct answer: Debit Cash, Credit Accounts Receivable

Collecting a receivable increases Cash (debit) and decreases Accounts Receivable (credit); no new revenue is recognized.

Question 31: A worksheet is used in the bookkeeping cycle primarily to:

Record adjusting entries permanently
Post transactions to accounts
Organize data before preparing formal financial statements (Correct answer)
Replace the general ledger

Correct answer: Organize data before preparing formal financial statements

A worksheet is an informal working document that helps bookkeepers organize trial balance, adjustments, and financial statement columns before formal preparation.

Question 32: When a business collects cash in advance for services not yet performed, it records:

A debit to Cash and a credit to Service Revenue
A debit to Accounts Receivable and a credit to Revenue
A debit to Unearned Revenue and a credit to Cash
A debit to Cash and a credit to Unearned Revenue (Correct answer)

Correct answer: A debit to Cash and a credit to Unearned Revenue

Cash received before services are performed creates a liability (Unearned Revenue) until the service is delivered.

Question 33: When a customer returns merchandise previously purchased on credit, the seller's journal entry is:

Debit Accounts Receivable, Credit Sales Returns and Allowances
Debit Sales Returns and Allowances, Credit Accounts Receivable (Correct answer)
Debit Inventory, Credit Accounts Payable
Debit Cash, Credit Sales Returns and Allowances

Correct answer: Debit Sales Returns and Allowances, Credit Accounts Receivable

A customer return reduces revenue through Sales Returns and Allowances (debit) and reduces the outstanding receivable balance (credit) since no cash changes hands.

Question 34: In which order are financial statements typically prepared?

Income statement, statement of retained earnings, balance sheet (Correct answer)
Balance sheet, income statement, statement of cash flows
Balance sheet, statement of retained earnings, income statement
Statement of retained earnings, balance sheet, income statement

Correct answer: Income statement, statement of retained earnings, balance sheet

Net income from the income statement flows into the statement of retained earnings, which then feeds the balance sheet equity section.

Question 35: When depreciation is recorded, which accounts are affected?

Depreciation Expense is debited; Asset account is credited
Depreciation Expense is debited; Accumulated Depreciation is credited (Correct answer)
Asset account is debited; Depreciation Expense is credited
Accumulated Depreciation is debited; Cash is credited

Correct answer: Depreciation Expense is debited; Accumulated Depreciation is credited

Depreciation increases an expense account and increases a contra-asset account (Accumulated Depreciation), not the asset itself.

Question 36: A company purchases office supplies worth $500 on account. Which accounts are affected?

Debit Office Supplies, Credit Cash
Debit Office Supplies, Credit Accounts Payable (Correct answer)
Debit Cash, Credit Office Supplies
Debit Accounts Payable, Credit Office Supplies

Correct answer: Debit Office Supplies, Credit Accounts Payable

Purchasing supplies on account increases an asset (Office Supplies debit) and increases a liability (Accounts Payable credit).

Question 37: 19. For an owner's draw, what is the normal entry?

Can be both
None of the above
Credit
Debit (Correct answer)

Correct answer: Debit

An owner's draw represents a reduction in the owner's equity as cash or other assets are withdrawn from the business for personal use. In accounting, owner's equity accounts (like owner's draw) decrease with a debit entry. Therefore, an owner's draw is normally recorded as a debit.

Question 38: Which inventory costing method is prohibited under IFRS but allowed under U.S. GAAP?

Weighted-average cost
LIFO (Correct answer)
Specific identification
FIFO

Correct answer: LIFO

LIFO is permitted under U.S. GAAP but prohibited under IFRS because it can produce inventory values that do not reflect current economic reality.

Question 39: Which term describes the practice of requiring employees to take mandatory vacations to help detect fraud?

Background check
Dual control
Job rotation
Mandatory leave policy (Correct answer)

Correct answer: Mandatory leave policy

Mandatory vacations force another employee to handle duties, which can expose fraudulent schemes that require daily maintenance.

Question 40: Which entity's transactions are recorded in bookkeeping?

Shareholder
Business (Correct answer)
Owner

Correct answer: Business

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 41: A prepaid insurance payment of $1,200 for 12 months is recorded. After one month, the adjusting entry would be:

Debit Insurance Expense $100; Credit Prepaid Insurance $100 (Correct answer)
Debit Cash $100; Credit Insurance Expense $100
Debit Prepaid Insurance $100; Credit Insurance Expense $100
Debit Insurance Expense $1,200; Credit Cash $1,200

Correct answer: Debit Insurance Expense $100; Credit Prepaid Insurance $100

Each month, $100 of prepaid insurance expires and becomes an expense ($1,200 ÷ 12), reducing the prepaid asset and recognizing the expense.

Question 42: In order to prepare the final account, the ledger is not required.

True
False (Correct answer)

Correct answer: False

This statement is false. The ledger is absolutely essential for preparing final accounts, such as the income statement and balance sheet. It contains the summarized and classified balances for all asset, liability, equity, revenue, and expense accounts, which are directly used to compile these crucial financial reports.

Question 43: A bookkeeper who opens mail, records receipts, AND deposits checks violates which control principle?

Reconciliation
Physical controls
Segregation of duties (Correct answer)
Audit trail

Correct answer: Segregation of duties

Handling all steps of cash receipts without oversight creates an opportunity for theft that segregation of duties would prevent.

Question 44: What does a credit entry to the Notes Payable account indicate?

Cash has been received from a customer
The business has borrowed money and increased its debt (Correct answer)
Interest expense has been recorded
The business has repaid a loan

Correct answer: The business has borrowed money and increased its debt

Crediting Notes Payable increases the liability, indicating the business has taken on new debt by signing a promissory note.

Question 45: Which control requires the bank to verify each check number and amount against a company-provided list before paying it?

Bank reconciliation
Stop payment
Positive pay (Correct answer)
ACH block

Correct answer: Positive pay

Positive pay is a bank fraud prevention service where the bank matches checks presented for payment against the company's authorized list.

Question 46: A credit to Accounts Payable indicates:

Payment made to a supplier
A decrease in inventory
A purchase made on credit, increasing the amount owed (Correct answer)
A return of merchandise to a supplier

Correct answer: A purchase made on credit, increasing the amount owed

Crediting Accounts Payable increases this liability account, reflecting an amount owed to suppliers for credit purchases.

Question 47: What is the correct order for listing assets on a balance sheet under US GAAP?

Assets listed alphabetically
Assets listed by dollar amount, largest first
Current assets first, then non-current assets (Correct answer)
Non-current assets first, then current assets

Correct answer: Current assets first, then non-current assets

Under US GAAP, assets are listed in order of liquidity, with current assets (most liquid) appearing before non-current assets.

Question 48: A reversing entry is typically made on:

The last day of the current accounting period
Any day during the period
The first day of the new accounting period (Correct answer)
The date the original transaction occurred

Correct answer: The first day of the new accounting period

Reversing entries are made on the first day of the new period to automatically cancel accrual adjustments made at period-end.

Question 49: A bookkeeper debits Accounts Receivable and credits Service Revenue when a service is performed on credit. This step represents:

Posting to the ledger
Closing the revenue account
Journalizing the transaction (Correct answer)
Preparing the trial balance

Correct answer: Journalizing the transaction

Recording a transaction with its debit and credit in the journal is called journalizing.

Question 50: A $200 NSF (non-sufficient funds) check returned by the bank should be recorded as:

Debit Accounts Receivable $200; Credit Cash $200 (Correct answer)
Debit Cash $200; Credit Accounts Receivable $200
Debit Bad Debt Expense $200; Credit Cash $200
No entry required

Correct answer: Debit Accounts Receivable $200; Credit Cash $200

An NSF check reverses the original deposit: cash is reduced (credit) and the customer's receivable is reinstated (debit).

Question 51: 6. New Glory Corp. has a $150,000 sales revenue, a $12,000 sales discount, a $24,000 sales returns allowance, and a $60,000 cost of goods sold. What is New Glory Corp.'s net sales revenue?

$60,000
$114,000 (Correct answer)
$100,000
$86,000

Correct answer: $114,000

Net sales revenue is calculated by taking the gross sales revenue and subtracting any sales discounts and sales returns and allowances. In this case, $150,000 (Sales Revenue) - $12,000 (Sales Discount) - $24,000 (Sales Returns Allowance) = $114,000. The cost of goods sold is not included in this calculation.

Question 52: At the end of the accounting period, a bookkeeper performs closing entries. What is the main objective of this process?

To transfer the balances of temporary accounts (like revenues and expenses) to permanent accounts (like Retained Earnings). (Correct answer)
To prepare a post-closing trial balance to ensure debits equal credits before adjustments.
To adjust the balances of asset accounts to their fair market value.
To record all transactions that occurred on the last day of the fiscal year.

Correct answer: To transfer the balances of temporary accounts (like revenues and expenses) to permanent accounts (like Retained Earnings).

Closing entries are made to reset the balances of all temporary accounts (revenues, expenses, and dividends) to zero at the end of the period. This is done by transferring their net effect to the Retained Earnings account, a permanent equity account. This process ensures that the income statement accounts start with a zero balance for the next accounting period.

Question 53: Which of the following transactions would be recorded in the cash receipts journal?

Collection of an accounts receivable balance (Correct answer)
Sale of merchandise on account
Payment of rent by check
Purchase of office supplies on credit

Correct answer: Collection of an accounts receivable balance

The cash receipts journal records all incoming cash, including collections from customers who previously bought on credit.

Question 54: What is the purpose of reversing entries in the bookkeeping cycle?

To simplify recording of cash transactions in the next period related to prior-period accruals (Correct answer)
To transfer balances from temporary to permanent accounts
To correct errors made in the previous accounting period
To close revenue and expense accounts to retained earnings

Correct answer: To simplify recording of cash transactions in the next period related to prior-period accruals

Reversing entries, made on the first day of the new period, simplify recording routine cash payments or receipts tied to prior-period accruals.

Question 55: A bookkeeper accidentally posts a $150 debit to Supplies instead of Office Equipment. This is an example of an error of:

Commission (wrong account) (Correct answer)
Original entry
Omission
Principle

Correct answer: Commission (wrong account)

An error of commission occurs when the correct amount is recorded but posted to the wrong account of the same type.

Question 56: The normal balance of the Accounts Payable account is a:

Credit, because it is a liability account (Correct answer)
Debit, because it is decreased by payments
Credit, because it represents an asset
Debit, because cash will be paid in the future

Correct answer: Credit, because it is a liability account

Accounts Payable is a liability, and liabilities have normal credit balances that increase with credits.

Question 57: A company has total assets of $500,000 and total liabilities of $320,000. What is the stockholders' equity?

$820,000
$500,000
$180,000 (Correct answer)
$320,000

Correct answer: $180,000

Using the accounting equation (Assets = Liabilities + Equity), equity equals $500,000 − $320,000 = $180,000.

Question 58: Which activity is considered a preventive internal control?

Performing monthly bank reconciliations
Conducting an annual internal audit
Requiring supervisory approval before disbursements (Correct answer)
Reviewing expense reports after payment

Correct answer: Requiring supervisory approval before disbursements

Preventive controls, like requiring approvals before transactions occur, stop errors and fraud before they happen.

Question 59: A 'three-way match' in accounts payable involves comparing which three documents?

Purchase requisition, budget report, and cash receipt
Purchase order, receiving report, and vendor invoice (Correct answer)
Sales invoice, bank statement, and ledger
Journal entry, trial balance, and general ledger

Correct answer: Purchase order, receiving report, and vendor invoice

A three-way match compares the purchase order (what was ordered), the receiving report (what was received), and the vendor invoice (what is being billed) to ensure all three agree before payment is approved.

Question 60: In the accounting cycle, which of these comes first?

Journals
Transactions (Correct answer)
Trial balance

Correct answer: Transactions

The accounting cycle always begins with identifying and analyzing business transactions. These transactions are the fundamental events that necessitate financial recording. All subsequent steps, such as journaling, posting to ledgers, and preparing financial statements, stem from these initial transactions.

Question 61: An accrued expense journal entry at period-end typically includes:

A debit to an expense account and a credit to a payable account (Correct answer)
A debit to a payable account and a credit to an expense account
A debit to prepaid expense and a credit to cash
A debit to cash and a credit to expense

Correct answer: A debit to an expense account and a credit to a payable account

Accrued expenses are costs incurred but not yet paid, recorded by debiting the expense and crediting the corresponding payable liability.

Question 62: In a T-account, the left side always represents:

Credits for all account types
The normal balance for revenue accounts
Increases for liability accounts
The debit side (Correct answer)

Correct answer: The debit side

By convention, the left side of every T-account is always the debit side, regardless of whether debits increase or decrease that particular account.

Question 63: The ledger account that accumulates depreciation over an asset's life is called:

Book Value
Accumulated Depreciation (Correct answer)
Depreciation Expense
Asset Contra Account

Correct answer: Accumulated Depreciation

Accumulated Depreciation is a contra-asset account that grows each period as depreciation expense is recorded.

Question 64: When a business pays rent in advance, the prepayment is initially recorded as:

Rent Expense
Owner's Equity
A liability
Prepaid Rent (an asset) (Correct answer)

Correct answer: Prepaid Rent (an asset)

Prepaid rent is an asset because the business has paid for a future benefit — the right to use property.

Question 65: Which of the following is the primary purpose of making adjusting entries?

To ensure that all cash transactions are recorded before closing the books.
To prepare the cash book for the bank reconciliation.
To correct errors made in the general ledger during the period.
To apply the matching principle by recording revenues when earned and expenses when incurred. (Correct answer)

Correct answer: To apply the matching principle by recording revenues when earned and expenses when incurred.

Adjusting entries are crucial for accrual basis accounting. Their main purpose is to ensure that revenues are recognized in the period they are earned and expenses are matched to the revenues they helped generate, regardless of when cash is exchanged.

Question 66: A business performs services and receives $300 cash immediately. How is revenue recorded?

Debit Cash, Credit Accounts Receivable
Debit Service Revenue, Credit Cash
Debit Cash, Credit Service Revenue (Correct answer)
Debit Service Revenue, Credit Accounts Payable

Correct answer: Debit Cash, Credit Service Revenue

Cash received for services increases Cash (debit) and increases Service Revenue (credit), reflecting earned income.

Question 67: Is there usually a debit or credit balance on a contra revenue account?

Debit (Correct answer)
Credit

Correct answer: Debit

A contra revenue account, such as Sales Returns and Allowances or Sales Discounts, reduces the total revenue reported. Since revenue accounts normally carry a credit balance, a contra revenue account must have the opposite effect to decrease revenue. Therefore, contra revenue accounts typically have a normal debit balance.

Question 68: An employer withholds $1,800 in federal income tax, $744 in Social Security, and $174 in Medicare from employee wages this month. What is the total employer tax deposit required?

$4,436.00
$2,462.00
$2,718.00
$3,462.00 (Correct answer)

Correct answer: $3,462.00

The employer matches the $744 Social Security and $174 Medicare, so total = $1,800 + $744 + $174 + $744 + $174 = $3,636; but matching only employee SS+Medicare = $744+$174=$918 employer share; total deposit = $1,800 + $744 + $174 + $744 + $174 = $3,636.

Question 69: 20. What is the usual balance in wages payable?

None of the above
Credit (Correct answer)
Debit
Can be both

Correct answer: Credit

Wages Payable is a liability account, representing the amount of wages owed to employees for work performed but not yet paid. Liabilities normally carry a credit balance, as they represent obligations of the company. When wages are incurred but not paid, the Wages Payable account is credited to increase the liability.

Question 70: A firm earns $3,500 in consulting fees and immediately collects cash. The correct entry is:

Debit Cash $3,500, Credit Consulting Revenue $3,500 (Correct answer)
Debit Cash $3,500, Credit Accounts Payable $3,500
Debit Accounts Receivable $3,500, Credit Revenue $3,500
Debit Revenue $3,500, Credit Cash $3,500

Correct answer: Debit Cash $3,500, Credit Consulting Revenue $3,500

Collecting cash for services rendered increases the asset Cash (debit) and increases revenue (credit).

Question 71: Where did the general ledger information come from?

General journal (Correct answer)
Bank account
Accounting source documents

Correct answer: General journal

Information for the general ledger originates from the general journal. Transactions are first recorded chronologically in the general journal (or special journals), detailing the accounts to be debited and credited. This journal entry data is then 'posted' to the respective individual accounts in the general ledger, which serves as the book of final entry.

Question 72: After posting from the general journal, the account number is written in the journal's posting reference column to indicate:

The balance in that account
The page number in the ledger
That the entry has been posted to the ledger (Correct answer)
The date of the original transaction

Correct answer: That the entry has been posted to the ledger

Recording the ledger account number in the journal's PR column confirms the entry has been successfully posted.

Question 73: 3. Which of the choices is a working capital item?

Accounts receivable (Correct answer)
Fixed assets
Long-term investments
Bonds payable

Correct answer: Accounts receivable

Working capital is the difference between current assets and current liabilities, indicating a company's short-term liquidity. Accounts receivable is a current asset, meaning it is expected to be converted into cash within one year, making it a key component of working capital.

Question 74: The process of transferring journal entry amounts to the appropriate ledger accounts is called:

Posting (Correct answer)
Journalizing
Closing
Adjusting

Correct answer: Posting

Posting is the step in the accounting cycle where amounts from the general journal are transferred to the individual ledger accounts.

Question 75: When a business purchases supplies on account, which journal entry is correct?

Debit Cash, Credit Supplies
Debit Supplies, Credit Accounts Payable (Correct answer)
Debit Supplies Expense, Credit Cash
Debit Accounts Payable, Credit Supplies

Correct answer: Debit Supplies, Credit Accounts Payable

Purchasing supplies on account increases the Supplies asset (debit) and creates a liability in Accounts Payable (credit).

Question 76: An owner withdraws $1,000 cash for personal use. How is this recorded?

Debit Revenue $1,000, Credit Cash $1,000
Debit Cash $1,000, Credit Drawing $1,000
Debit Expense $1,000, Credit Cash $1,000
Debit Drawing $1,000, Credit Cash $1,000 (Correct answer)

Correct answer: Debit Drawing $1,000, Credit Cash $1,000

Owner withdrawals are recorded as a debit to the Drawing (or Withdrawal) account and a credit to Cash.

Question 77: Debits are recorded on which side of the ledger?

Right
Left (Correct answer)
Middle

Correct answer: Left

In the standard T-account format used for ledgers, debits are always recorded on the left-hand side of the account. Conversely, credits are always recorded on the right-hand side. This convention is fundamental to double-entry bookkeeping.

Question 78: Which inventory cost flow assumption produces the same result under both periodic and perpetual systems when prices are stable?

FIFO (Correct answer)
Specific identification
Weighted-average cost
LIFO

Correct answer: FIFO

FIFO produces the same COGS and ending inventory values under both periodic and perpetual systems because the same oldest units are always sold first regardless of timing.

Question 79: What does a debit balance in the Retained Earnings account indicate?

Dividends have been declared
The company has a deficit (accumulated losses) (Correct answer)
The company has accumulated profits
The account is in error

Correct answer: The company has a deficit (accumulated losses)

A debit balance in Retained Earnings is called a deficit and means cumulative losses exceed cumulative profits since inception.

Question 80: How does the bookkeeping cycle differ under a cash basis versus accrual basis?

Accrual basis only records cash transactions; cash basis records all economic events
Cash basis uses adjusting entries; accrual basis does not
There is no difference — both methods produce identical financial statements
Cash basis records transactions only when cash changes hands; accrual records when earned or incurred (Correct answer)

Correct answer: Cash basis records transactions only when cash changes hands; accrual records when earned or incurred

Under cash basis, revenues and expenses are recorded only when cash is received or paid, while accrual basis follows the matching and revenue recognition principles.

Question 81: A company counts 500 units of inventory at year-end but forgot to include 50 units held on consignment for another company. The correct ending inventory count is:

550 units — all physical goods on-site must be counted
500 units — consigned goods belong to the consignor, not the holder (Correct answer)
500 units — consigned goods are always counted by the consignee
450 units — consigned goods must be excluded from both parties

Correct answer: 500 units — consigned goods belong to the consignor, not the holder

Goods held on consignment belong to the consignor (the owner) and must NOT be included in the consignee's inventory count.

Question 82: The Purchases Journal is used to record purchases of:

Equipment for cash or credit
All assets for cash
Office supplies for cash
Merchandise inventory on credit (Correct answer)

Correct answer: Merchandise inventory on credit

The purchases journal is a special journal specifically for recording merchandise bought on credit from suppliers.

Question 83: Which of the following is NOT a component of the COSO internal control framework?

Risk assessment
Monitoring activities
Profitability analysis (Correct answer)
Control environment

Correct answer: Profitability analysis

Profitability analysis is a financial metric, not one of the five COSO components: control environment, risk assessment, control activities, information/communication, and monitoring.

Question 84: The account's name is always at the top.

True (Correct answer)
False

Correct answer: True

True. In accounting, every ledger account is clearly identified by its name, which is always placed at the top of the account. This allows for easy identification and organization of financial data, ensuring that transactions are recorded in the correct accounts.

Question 85: After all posting is complete, the next step in the accounting cycle is to:

Prepare an unadjusted trial balance (Correct answer)
Record adjusting entries in the journal
Prepare the chart of accounts
Close revenue and expense accounts

Correct answer: Prepare an unadjusted trial balance

After posting, the bookkeeper prepares an unadjusted trial balance to verify that total debits equal total credits before making adjustments.

Question 86: A company pays $12,000 for a 12-month insurance policy on October 1. What is the adjusting entry on December 31?

Debit Insurance Expense $9,000; Credit Prepaid Insurance $9,000
Debit Insurance Expense $12,000; Credit Cash $12,000
Debit Insurance Expense $3,000; Credit Prepaid Insurance $3,000 (Correct answer)
Debit Prepaid Insurance $3,000; Credit Insurance Expense $3,000

Correct answer: Debit Insurance Expense $3,000; Credit Prepaid Insurance $3,000

Three months (Oct, Nov, Dec) of the 12-month policy have expired, so $12,000 × 3/12 = $3,000 must be recognized as expense.

Question 87: Which of the following describes the primary purpose of the Statement of Cash Flows?

To detail the changes in the owners' equity throughout an accounting period.
To summarize the cash inflows and outflows from operating, investing, and financing activities over a period. (Correct answer)
To present a company's financial position at a single point in time.
To report the revenues, expenses, and resulting net income or loss for a period.

Correct answer: To summarize the cash inflows and outflows from operating, investing, and financing activities over a period.

The Statement of Cash Flows provides a detailed summary of how a company's cash position has changed over a specific accounting period. It categorizes all cash transactions into three main activities: operating, investing, and financing, giving users insight into the company's liquidity and solvency.

Question 88: An account entry on the right side is referred to as.

Date
Debit
Credit (Correct answer)
Account Tittle

Correct answer: Credit

In the double-entry bookkeeping system, the right side of any T-account is always designated for recording credits. This is a fundamental convention that helps maintain the accounting equation. Credits increase liability, equity, and revenue accounts, while they decrease asset and expense accounts.

Question 89: Daybooks are also called.

Bookkeeping journals (Correct answer)
Bank statements
Source documents

Correct answer: Bookkeeping journals

Journals are often called daybooks because transactions are recorded in them daily, in chronological order, as they occur. They serve as the initial record of financial events before being transferred to the ledgers. Therefore, 'bookkeeping journals' is another term for these records.

Question 90: Which of the following best distinguishes accounts payable from notes payable?

Accounts payable always carries interest; notes payable does not
Notes payable is always short-term; accounts payable can be long-term
Accounts payable arises from credit purchases; notes payable is a formal written promise to pay (Correct answer)
Accounts payable is an asset; notes payable is a liability

Correct answer: Accounts payable arises from credit purchases; notes payable is a formal written promise to pay

Accounts payable results from routine credit purchases with informal terms, while notes payable is a formal promissory note that may include interest and specific repayment terms.

Question 91: Mark the journals that are special.

Bank statement
General journal
Cash payments journal (Correct answer)
Purchases journal (Correct answer)
Sales returns and allowances (Correct answer)
Sales journal (Correct answer)

Correct answer: Cash payments journal

Special journals are designed to efficiently record specific types of high-volume transactions. Common examples include the Sales Journal for credit sales, the Purchases Journal for credit purchases, and the Cash Payments Journal for all cash outflows. A Sales Returns and Allowances Journal may also be used for recording customer returns. The General Journal is used for transactions that don't fit into any special journal.

Question 92: Which entry correctly records the payment of a $2,000 liability that was previously recorded?

Debit Expense $2,000, Credit Cash $2,000
Debit Cash $2,000, Credit Accounts Payable $2,000
Debit Accounts Payable $2,000, Credit Revenue $2,000
Debit Accounts Payable $2,000, Credit Cash $2,000 (Correct answer)

Correct answer: Debit Accounts Payable $2,000, Credit Cash $2,000

Paying off a recorded liability decreases the liability (debit Accounts Payable) and decreases cash (credit Cash).

Question 93: What does a credit entry to the owner's Capital account represent?

An expense paid by the owner
A decrease in net income
A withdrawal by the owner
An increase in owner's equity (Correct answer)

Correct answer: An increase in owner's equity

Credits increase equity accounts, so a credit to Capital increases the owner's equity stake in the business.

Question 94: What is the deadline for employers to furnish Form W-2 to employees for the prior calendar year?

February 28
January 15
March 15
January 31 (Correct answer)

Correct answer: January 31

Employers must furnish Form W-2 to employees by January 31 following the close of the calendar year.

Question 95: In which book of original entry are most routine business transactions first recorded?

The trial balance
The balance sheet
The general ledger
The general journal (Correct answer)

Correct answer: The general journal

The general journal is the book of original entry where transactions are first recorded in chronological order.

Question 96: 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

True
False (Correct answer)

Correct answer: False

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 97: Payment of insurance through the bank necessitates the creation of two separate accounts.

Petty Cash Account
Insurance Account (Correct answer)
Rent Account
Bank Account (Correct answer)

Correct answer: Insurance Account

When an insurance payment is made through the bank, two accounts are directly affected. The 'Insurance Account' is debited to record the expense incurred by the business. Concurrently, the 'Bank Account' is credited to reflect the decrease in cash held at the bank, adhering to the double-entry bookkeeping principle.

Question 98: Which inventory costing method assumes the oldest inventory items are sold first?

FIFO (Correct answer)
Specific Identification
Weighted Average
LIFO

Correct answer: FIFO

FIFO (First-In, First-Out) assumes the first items purchased are the first items sold.

Question 99: When you post payments, you'll be able to:

Post payment and apply to the oldest invoices.
All the above (Correct answer)
Post payment to customers accounts and not disburse.
Post payments and disburse to specific invoices.

Correct answer: All the above

When posting payments, accounting systems typically offer flexibility to handle various scenarios. You can apply payments to the oldest outstanding invoices, disburse them to specific invoices as instructed by the customer, or simply post them to the customer's account as an unapplied credit. Therefore, all these options are generally available.

Question 100: The Statement of Retained Earnings serves as a crucial link between which two primary financial statements?

The Statement of Cash Flows and the Income Statement.
The Statement of Cash Flows and the Balance Sheet.
The Trial Balance and the Income Statement.
The Income Statement and the Balance Sheet. (Correct answer)

Correct answer: The Income Statement and the Balance Sheet.

The Statement of Retained Earnings starts with the beginning balance of retained earnings, adds the net income (which comes directly from the Income Statement), and subtracts any dividends paid. The resulting ending balance of retained earnings is then reported in the stockholders' equity section of the Balance Sheet.

Certified Public Bookkeeper (CPB) Exam

The CPB exam certifies individuals in fundamental bookkeeping principles, payroll, QuickBooks, and accounting software.

100

Questions

180 min

Time Limit

80%

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Sources & references

Exam facts on this page (fees, format, dates, passing scores) are checked against these official sources; the date is our last check. Editorial policy

nacpb.org — Test delivery, registration deadline, fees, score validity, renewal, passing score · verified Oct 2026
consortiaaccountingschool.com — Eligibility, fees, retake fee · verified Oct 2026