CPB / BookKeeping Bookkeeping Cycle 5 — Questions and Answers
Question 1: Which of the following errors would cause the trial balance to be out of balance?
- Posting a debit of $500 to an account as $50 (Correct answer)
- Recording a transaction to the wrong accounts with equal debits and credits
- Omitting an entire transaction from the journals and ledger
- Using the wrong account name while keeping amounts correct
Correct answer: Posting a debit of $500 to an account as $50
Posting a wrong amount to only one side of the entry creates an imbalance between total debits and credits.
Question 2: What distinguishes a general journal from a special journal?
- A general journal records all transaction types; special journals record only specific recurring transactions (Correct answer)
- A general journal is used only for adjusting entries; special journals record daily transactions
- A general journal is the final book of entry; special journals are used for source documents
- Special journals record non-cash transactions; the general journal records all cash transactions
Correct answer: A general journal records all transaction types; special journals record only specific recurring transactions
Special journals (sales, purchases, cash receipts, cash payments) handle high-volume routine transactions; the general journal handles all others.
Question 3: The matching principle in bookkeeping requires that:
- Expenses be recognized in the same period as the revenues they helped generate (Correct answer)
- Cash inflows match cash outflows each period
- Debits always equal credits in every journal entry
- Assets match liabilities on the balance sheet
Correct answer: Expenses be recognized in the same period as the revenues they helped generate
The matching principle ensures expenses are recorded in the period the related revenue is earned, supporting accurate income measurement.
Question 4: If a $200 cash payment for utilities is mistakenly debited to Supplies, the correcting entry would:
- Debit Utilities Expense $200 and credit Supplies $200 (Correct answer)
- Debit Supplies $200 and credit Utilities Expense $200
- Debit Utilities Expense $200 and credit Cash $200
- Debit Cash $200 and credit Supplies $200
Correct answer: Debit Utilities Expense $200 and credit Supplies $200
To correct the error, debit the correct account (Utilities Expense) and credit the incorrectly debited account (Supplies) for $200.
Question 5: How does the bookkeeping cycle differ under a cash basis versus accrual basis?
- Cash basis records transactions only when cash changes hands; accrual records when earned or incurred (Correct answer)
- Cash basis uses adjusting entries; accrual basis does not
- Accrual basis only records cash transactions; cash basis records all economic events
- There is no difference — both methods produce identical financial statements
Correct answer: Cash basis records transactions only when cash changes hands; accrual records when earned or incurred
Under cash basis, revenues and expenses are recorded only when cash is received or paid, while accrual basis follows the matching and revenue recognition principles.
Question 6: Which statement about the normal balance of an account is correct?
- Asset and expense accounts have normal debit balances (Correct answer)
- Liability and expense accounts have normal debit balances
- Revenue and asset accounts have normal credit balances
- Equity and asset accounts have normal credit balances
Correct answer: Asset and expense accounts have normal debit balances
Assets and expenses are increased by debits, so their normal (expected) balance is a debit balance.
Question 7: At year-end, a company has earned $2,000 of interest on a note receivable that will not be collected until next year. The adjusting entry is:
- Debit Interest Receivable $2,000; Credit Interest Revenue $2,000 (Correct answer)
- Debit Interest Revenue $2,000; Credit Interest Receivable $2,000
- Debit Cash $2,000; Credit Interest Revenue $2,000
- Debit Interest Expense $2,000; Credit Interest Payable $2,000
Correct answer: Debit Interest Receivable $2,000; Credit Interest Revenue $2,000
Interest earned but not yet received is an accrued revenue, recorded by debiting Interest Receivable and crediting Interest Revenue.
CPB / BookKeeping Bookkeeping Cycle 5
Which of the following errors would cause the trial balance to be out of balance?