CPB / BookKeeping Bookkeeping and Accounting 4 — Questions and Answers
Question 1: Which type of account is closed at the end of an accounting period?
- Asset accounts
- Liability accounts
- Revenue and expense accounts (Correct answer)
- Equity accounts
Correct answer: Revenue and expense accounts
Revenue and expense accounts (temporary accounts) are closed to Retained Earnings or Owner's Capital at period end to reset their balances.
Question 2: The straight-line depreciation method allocates cost:
- Based on units produced each year
- In decreasing amounts each year
- In equal amounts each year (Correct answer)
- In increasing amounts each year
Correct answer: In equal amounts each year
Straight-line depreciation divides the depreciable cost equally across each year of the asset's useful life.
Question 3: A credit to Accounts Payable indicates:
- Payment made to a supplier
- A purchase made on credit, increasing the amount owed (Correct answer)
- A return of merchandise to a supplier
- A decrease in inventory
Correct answer: A purchase made on credit, increasing the amount owed
Crediting Accounts Payable increases this liability account, reflecting an amount owed to suppliers for credit purchases.
Question 4: What is a contra account?
- An account with a balance that is opposite to its related account's normal balance (Correct answer)
- A temporary account closed at year-end
- An account used only for adjusting entries
- A liability account paired with an asset
Correct answer: An account with a balance that is opposite to its related account's normal balance
A contra account carries a balance opposite to its paired account (e.g., Accumulated Depreciation offsets the asset Equipment).
Question 5: Which document is the source for recording a cash sale?
- Purchase order
- Sales invoice or cash register receipt (Correct answer)
- Bank statement
- Vendor invoice
Correct answer: Sales invoice or cash register receipt
A sales invoice or cash register receipt is the source document evidencing a cash sale transaction.
Question 6: If a trial balance is in balance, it means:
- There are no errors in the accounting records
- Total debits equal total credits in the ledger (Correct answer)
- Net income has been correctly calculated
- All journal entries have been posted correctly
Correct answer: Total debits equal total credits in the ledger
A balanced trial balance only confirms that total debits equal total credits; it does not guarantee the absence of all errors.
Question 7: Under the cash basis of accounting, expenses are recognized when:
- They are incurred
- The invoice is received
- Cash is paid (Correct answer)
- The fiscal year ends
Correct answer: Cash is paid
Cash basis accounting records expenses only when the actual cash payment is made.
CPB / BookKeeping Bookkeeping and Accounting 4
Which type of account is closed at the end of an accounting period?