CPB / BookKeeping Adjusting Entries and Reconciliations 4 — Questions and Answers
Question 1: Which reconciling item requires a journal entry in the company's books?
- Deposit in transit
- Outstanding check
- Bank error overstating the balance
- NSF check charged by the bank (Correct answer)
Correct answer: NSF check charged by the bank
An NSF check appears on the bank statement but not yet in the books, so the bookkeeper must record a journal entry to reduce cash.
Question 2: A company accrues $1,200 of salaries at year-end. When the salaries are paid in January, which entry is recorded?
- Debit Salaries Expense $1,200; Credit Cash $1,200
- Debit Salaries Payable $1,200; Credit Cash $1,200 (Correct answer)
- Debit Salaries Payable $1,200; Credit Salaries Expense $1,200
- Debit Cash $1,200; Credit Salaries Payable $1,200
Correct answer: Debit Salaries Payable $1,200; Credit Cash $1,200
When accrued salaries are paid, the liability (Salaries Payable) is debited and Cash is credited; the expense was already recognized in the prior period.
Question 3: Book value of an asset is best defined as:
- The original cost of the asset
- Cost minus accumulated depreciation (Correct answer)
- The asset's fair market value
- Cost minus salvage value
Correct answer: Cost minus accumulated depreciation
Book value equals original cost less all accumulated depreciation recorded to date.
Question 4: At year-end, supplies on hand total $300. The beginning balance was $800 and $1,000 in supplies were purchased during the year. What is the supplies expense for the period?
- $1,000
- $1,300
- $1,500 (Correct answer)
- $700
Correct answer: $1,500
Supplies available = $800 + $1,000 = $1,800; ending balance = $300; supplies used = $1,800 − $300 = $1,500.
Question 5: Which account appears on the balance sheet as a result of recording depreciation?
- Depreciation Expense
- Retained Earnings
- Accumulated Depreciation (Correct answer)
- Cost of Goods Sold
Correct answer: Accumulated Depreciation
Accumulated Depreciation is a contra-asset account shown on the balance sheet, offsetting the related asset's cost.
Question 6: If ending Accounts Receivable on the bank reconciliation exceeds the book balance, the most likely cause is:
- An outstanding check not yet cleared
- A deposit in transit not yet cleared
- A bank error crediting the wrong account
- An NSF check not yet recorded in the books (Correct answer)
Correct answer: An NSF check not yet recorded in the books
An NSF check reduces the bank balance below the book balance because the book has not yet reversed the original deposit.
Question 7: Under the accrual basis, revenue from a December service billed in January should be recognized in:
- January, when the invoice is sent
- The period when cash is collected
- December, when the service was performed (Correct answer)
- Either period, at management's discretion
Correct answer: December, when the service was performed
Accrual accounting requires revenue to be recognized when earned (service performed), not when invoiced or collected.
CPB / BookKeeping Adjusting Entries and Reconciliations 4
Which reconciling item requires a journal entry in the company's books?