CPB / BookKeeping Bookkeeping 4

Question 1

What type of account is 'Accumulated Depreciation'?

Accepted Answer

Contra asset

Answer

Accumulated Depreciation is a contra asset account that offsets the cost of a fixed asset to show its net book value.

Question 2

Which of the following transactions increases both an asset and a liability?

Accepted Answer

Purchase supplies on account

Answer

Purchasing supplies on account increases Supplies (asset) and increases Accounts Payable (liability).

Question 3

The principle that expenses should be recognized in the same period as the revenues they help generate is called the:

Accepted Answer

Matching principle

Answer

The matching principle requires that expenses be recorded in the same accounting period as the revenues they helped produce.

Question 4

A check written by the company for $540 was mistakenly recorded in the cash payments journal as $450. This is a:

Accepted Answer

Transposition error

Answer

A transposition error occurs when digits are reversed (540 recorded as 450), and the difference is always divisible by 9.

Question 5

Which financial ratio measures a company's ability to meet short-term obligations using only its most liquid assets?

Accepted Answer

Quick (acid-test) ratio

Answer

The quick ratio excludes inventory and prepaid expenses, focusing on cash, marketable securities, and net receivables versus current liabilities.

CPB / BookKeeping Practice Test