CPB / BookKeeping Bookkeeping and Accounting 5 — Questions and Answers
Question 1: Which of the following is an example of an adjusting entry?
- Recording a cash sale
- Accruing wages earned but not yet paid (Correct answer)
- Paying a supplier invoice
- Recording a check received from a customer
Correct answer: Accruing wages earned but not yet paid
Accruing unpaid wages is an adjusting entry that recognizes an expense incurred before cash payment is made.
Question 2: Gross profit is calculated as:
- Net sales minus operating expenses
- Net sales minus cost of goods sold (Correct answer)
- Total revenues minus total expenses
- Net sales minus net income
Correct answer: Net sales minus cost of goods sold
Gross profit equals net sales revenue minus the cost of goods sold, before deducting operating expenses.
Question 3: Which internal control procedure helps prevent check fraud?
- Using LIFO inventory costing
- Requiring dual signatures on checks above a threshold (Correct answer)
- Preparing monthly income statements
- Using straight-line depreciation
Correct answer: Requiring dual signatures on checks above a threshold
Requiring two authorized signatures on large checks makes it harder for one person to commit fraud undetected.
Question 4: The going concern assumption means that:
- A business will operate indefinitely into the future (Correct answer)
- Assets are recorded at their current market values
- Revenue equals expenses over time
- All debts will be paid within one year
Correct answer: A business will operate indefinitely into the future
The going concern assumption presumes the business will continue operating long enough to fulfill its obligations and objectives.
Question 5: Which of the following would appear on a balance sheet?
- Cost of Goods Sold
- Depreciation Expense
- Wages Expense
- Notes Payable (Correct answer)
Correct answer: Notes Payable
Notes Payable is a liability account that appears on the balance sheet, representing amounts owed on promissory notes.
Question 6: What is the effect of paying a previously recorded accounts payable balance?
- Decreases liabilities and decreases assets (Correct answer)
- Increases assets and decreases liabilities
- Decreases expenses and decreases assets
- No effect on the accounting equation
Correct answer: Decreases liabilities and decreases assets
Paying an accounts payable reduces the liability (A/P) and reduces the asset Cash by equal amounts.
Question 7: Which accounting principle requires that expenses be recognized in the same period as the revenues they helped generate?
- Revenue Recognition Principle
- Historical Cost Principle
- Matching Principle (Correct answer)
- Materiality Principle
Correct answer: Matching Principle
The Matching Principle requires expenses to be recorded in the period when the related revenue is earned.
CPB / BookKeeping Bookkeeping and Accounting 5
Which of the following is an example of an adjusting entry?