CPB / BookKeeping Bookkeeping Cycle 3 — Questions and Answers
Question 1: Which document is used as the source for journalizing a credit sale transaction?
- Sales invoice (Correct answer)
- Purchase order
- Receiving report
- Vendor statement
Correct answer: Sales invoice
A sales invoice is the source document that supports recording a credit sale in the journal.
Question 2: Equipment costing $50,000 with a $5,000 salvage value is depreciated over 5 years using straight-line. What is the annual depreciation?
- $9,000 (Correct answer)
- $10,000
- $45,000
- $5,000
Correct answer: $9,000
Annual depreciation = ($50,000 − $5,000) ÷ 5 years = $9,000 per year.
Question 3: When a business collects cash in advance for services not yet performed, it records:
- A debit to Cash and a credit to Unearned Revenue (Correct answer)
- A debit to Accounts Receivable and a credit to Revenue
- A debit to Cash and a credit to Service Revenue
- A debit to Unearned Revenue and a credit to Cash
Correct answer: A debit to Cash and a credit to Unearned Revenue
Cash received before services are performed creates a liability (Unearned Revenue) until the service is delivered.
Question 4: The ledger account that accumulates depreciation over an asset's life is called:
- Accumulated Depreciation (Correct answer)
- Depreciation Expense
- Book Value
- Asset Contra Account
Correct answer: Accumulated Depreciation
Accumulated Depreciation is a contra-asset account that grows each period as depreciation expense is recorded.
Question 5: Which trial balance is prepared AFTER adjusting entries but BEFORE financial statements?
- Adjusted trial balance (Correct answer)
- Unadjusted trial balance
- Post-closing trial balance
- Worksheet trial balance
Correct answer: Adjusted trial balance
The adjusted trial balance reflects all end-of-period adjustments and is used to prepare the financial statements.
Question 6: A bookkeeper debits Accounts Receivable and credits Service Revenue when a service is performed on credit. This step represents:
- Journalizing the transaction (Correct answer)
- Posting to the ledger
- Preparing the trial balance
- Closing the revenue account
Correct answer: Journalizing the transaction
Recording a transaction with its debit and credit in the journal is called journalizing.
Question 7: If supplies on hand at year-end are $400 but the Supplies account shows $1,100, the adjusting entry credits Supplies for:
- $700 (Correct answer)
- $400
- $1,100
- $1,500
Correct answer: $700
Supplies used = $1,100 − $400 = $700; Supplies Expense is debited $700 and Supplies is credited $700.
CPB / BookKeeping Bookkeeping Cycle 3
Which document is used as the source for journalizing a credit sale transaction?