CPB / BookKeeping Bookkeeping and Accounting 3

Question 1

Which inventory costing method assumes the oldest inventory items are sold first?

Accepted Answer

FIFO

Answer

FIFO (First-In, First-Out) assumes the first items purchased are the first items sold.

Question 2

Depreciation is best described as:

Accepted Answer

The allocation of an asset's cost over its useful life

Answer

Depreciation systematically allocates the cost of a long-term asset over the periods it provides economic benefit.

Question 3

If a company's total assets are $80,000 and total liabilities are $30,000, what is owners' equity?

Accepted Answer

$50,000

Answer

Using the accounting equation: Owners' Equity = Assets − Liabilities = $80,000 − $30,000 = $50,000.

Question 4

A petty cash fund is used to:

Accepted Answer

Pay small, miscellaneous business expenses

Answer

Petty cash funds provide a convenient way to pay for minor expenses without writing a check.

Question 5

What does the term 'net income' represent?

Accepted Answer

Revenues minus expenses for the period

Answer

Net income is calculated as total revenues minus total expenses for an accounting period.

CPB / BookKeeping Practice Test