CPB / BookKeeping Bookkeeping and Accounting 2

Question 1

A company purchases equipment for $12,000 cash. How is this transaction recorded?

Accepted Answer

Debit Equipment $12,000; Credit Cash $12,000

Answer

Purchasing equipment increases the asset Equipment (debit) and decreases the asset Cash (credit).

Question 2

Which financial statement shows a company's revenues and expenses over a period of time?

Accepted Answer

Income Statement

Answer

The Income Statement (Profit & Loss) summarizes revenues and expenses for a specific accounting period.

Question 3

Accounts Receivable has a normal balance of:

Accepted Answer

Debit

Answer

Accounts Receivable is an asset account and all asset accounts have a normal debit balance.

Question 4

What is the purpose of a bank reconciliation?

Accepted Answer

To match the company's cash book balance with the bank statement balance

Answer

A bank reconciliation identifies and explains differences between the company's cash records and the bank statement.

Question 5

Under the accrual basis of accounting, revenue is recognized when:

Accepted Answer

It is earned, regardless of when cash is received

Answer

Accrual accounting requires revenue to be recognized when earned, not when payment is collected.

CPB / BookKeeping Practice Test