CPB / BookKeeping Bookkeeping 3

Question 1

Which financial statement reports a company's revenues and expenses over a specific period?

Accepted Answer

Income Statement

Answer

The Income Statement (also called the Profit and Loss Statement) reports revenues and expenses for a defined accounting period.

Question 2

When a business pays its monthly rent in advance for six months, the initial entry debits:

Accepted Answer

Prepaid Rent

Answer

Prepaid Rent (an asset) is debited when rent is paid in advance because the benefit has not yet been consumed.

Question 3

Which bank reconciliation item requires a journal entry by the company?

Accepted Answer

Bank service charges

Answer

Bank service charges appear on the bank statement but not in the company's books, so a journal entry is needed to record them.

Question 4

What does the term 'double-entry bookkeeping' mean?

Accepted Answer

Every debit has an equal and offsetting credit

Answer

Double-entry bookkeeping means every transaction affects at least two accounts such that total debits always equal total credits.

Question 5

Which of the following best describes 'accounts payable'?

Accepted Answer

Money the company owes to suppliers

Answer

Accounts Payable represents amounts owed by the company to its vendors or suppliers for goods or services received on credit.

CPB / BookKeeping Practice Test