CPB / BookKeeping Bookkeeping 5

Question 1

Which of the following adjusting entries records revenue that has been earned but not yet received?

Accepted Answer

Debit Accounts Receivable, Credit Revenue

Answer

Accrued revenue is recorded by debiting Accounts Receivable and crediting Revenue to recognize income earned but not yet collected.

Question 2

What is the purpose of closing entries at the end of an accounting period?

Accepted Answer

To transfer temporary account balances to retained earnings

Answer

Closing entries zero out temporary accounts (revenues, expenses, dividends) and transfer their net balances to Retained Earnings.

Question 3

A company uses the allowance method for bad debts. When a specific account is written off, the entry is:

Accepted Answer

Debit Allowance for Doubtful Accounts, Credit Accounts Receivable

Answer

Under the allowance method, writing off a bad debt debits the Allowance and credits Accounts Receivable, with no impact on net income.

Question 4

Which inventory system updates the inventory account continuously after each purchase and sale?

Accepted Answer

Perpetual inventory system

Answer

The perpetual inventory system maintains a running balance in the Inventory account, updating it with every transaction.

Question 5

If a company has total assets of $180,000 and total liabilities of $75,000, what is owner's equity?

Accepted Answer

$105,000

Answer

Owner's Equity = Assets − Liabilities = $180,000 − $75,000 = $105,000.

CPB / BookKeeping Practice Test