CPB / BookKeeping Adjusting Entries and Reconciliations 3

Question 1

A company collected $6,000 in advance for services to be performed over 6 months. After 2 months, what adjusting entry is required?

Accepted Answer

Debit Unearned Revenue $2,000; Credit Service Revenue $2,000

Answer

After 2 months, $6,000 × 2/6 = $2,000 of revenue has been earned, shifting it from Unearned Revenue to Service Revenue.

Question 2

An outstanding check on a bank reconciliation should be:

Accepted Answer

Subtracted from the bank balance

Answer

Outstanding checks have been deducted in the books but not yet cleared the bank, so they are subtracted from the bank balance.

Question 3

What is the purpose of the adjusted trial balance?

Accepted Answer

To verify that debits equal credits after adjusting entries are posted

Answer

The adjusted trial balance confirms that total debits still equal total credits after all adjusting entries have been recorded.

Question 4

Which of the following would NOT require an adjusting entry at period end?

Accepted Answer

Cash paid for a current-period utility bill

Answer

A cash payment for a current-period bill is already recorded in full and requires no adjustment.

Question 5

If a bookkeeper fails to record an accrued expense adjusting entry, what is the effect on the financial statements?

Accepted Answer

Expenses understated; net income overstated; liabilities understated

Answer

Omitting an accrued expense understates expenses, overstates net income, and understates liabilities.

CPB / BookKeeping Practice Test