CPB / BookKeeping Bookkeeping Cycle 4

Question 1

What is the effect on the accounting equation when a business pays a liability in cash?

Accepted Answer

Assets decrease and liabilities decrease

Answer

Paying a liability reduces Cash (asset) and reduces the corresponding liability, keeping the equation balanced.

Question 2

Which of the following is an example of an accrued revenue adjusting entry?

Accepted Answer

Debit Accounts Receivable; Credit Service Revenue

Answer

Accrued revenue records earnings that have been earned but not yet billed or collected by debiting a receivable and crediting revenue.

Question 3

The Income Summary account is used during which phase of the bookkeeping cycle?

Accepted Answer

Closing entries

Answer

Income Summary is a temporary account used during closing entries to transfer net income or loss to Retained Earnings.

Question 4

A worksheet is used in the bookkeeping cycle primarily to:

Accepted Answer

Organize data before preparing formal financial statements

Answer

A worksheet is an informal working document that helps bookkeepers organize trial balance, adjustments, and financial statement columns before formal preparation.

Question 5

Under accrual accounting, when is revenue recognized?

Accepted Answer

When earned, regardless of when cash is received

Answer

The revenue recognition principle requires revenue to be recorded when it is earned, not necessarily when cash changes hands.

CPB / BookKeeping Practice Test

CPB / BookKeeping Practice Test

CPB / BookKeeping Bookkeeping Cycle 4