CPB / BookKeeping Bookkeeping 2

Question 1

Which inventory costing method assumes the most recently purchased items are sold first?

Accepted Answer

LIFO

Answer

LIFO (Last-In, First-Out) assumes the last items purchased are the first items sold.

Question 2

A company issues a $5,000 credit memo to a customer for returned goods. Which account is debited?

Accepted Answer

Sales Returns and Allowances

Answer

Sales Returns and Allowances is debited to record the reduction in revenue from returned goods.

Question 3

What is the normal balance of the Unearned Revenue account?

Accepted Answer

Credit

Answer

Unearned Revenue is a liability account with a normal credit balance since the company owes services or goods to the customer.

Question 4

Under the accrual basis, when should revenue be recognized for services rendered on credit?

Accepted Answer

When services are performed

Answer

Under accrual accounting, revenue is recognized when services are performed, regardless of when cash is received.

Question 5

Which of the following is NOT a component of the accounting equation?

Accepted Answer

Revenue

Answer

The accounting equation is Assets = Liabilities + Owner's Equity; Revenue is a component of equity but not a separate element in the equation.

CPB / BookKeeping Practice Test