CPB / BookKeeping Bookkeeping Journal 3 — Questions and Answers
Question 1: What does it mean to 'post' a journal entry?
- Transfer journal entry amounts to the general ledger accounts (Correct answer)
- Record a transaction in the journal
- Prepare a trial balance
- Issue a financial statement
Correct answer: Transfer journal entry amounts to the general ledger accounts
Posting is the process of transferring the debit and credit amounts from the journal to the corresponding general ledger accounts.
Question 2: A reversing entry is typically made on:
- The first day of the new accounting period (Correct answer)
- The last day of the current accounting period
- The date the original transaction occurred
- Any day during the period
Correct answer: The first day of the new accounting period
Reversing entries are made on the first day of the new period to automatically cancel accrual adjustments made at period-end.
Question 3: If a $500 credit sale is incorrectly recorded as a $5,000 credit sale, what correcting entry is needed?
- Debit Accounts Receivable $4,500; Credit Sales Revenue $4,500
- Debit Sales Revenue $4,500; Credit Accounts Receivable $4,500 (Correct answer)
- Debit Sales Revenue $500; Credit Accounts Receivable $500
- Debit Cash $4,500; Credit Sales Revenue $4,500
Correct answer: Debit Sales Revenue $4,500; Credit Accounts Receivable $4,500
To correct an overstatement, debit (reduce) Sales Revenue and credit (reduce) Accounts Receivable by the difference of $4,500.
Question 4: Which special journal is used to record all sales of merchandise on credit?
- Sales Journal (Correct answer)
- Cash Receipts Journal
- Purchases Journal
- General Journal
Correct answer: Sales Journal
The sales journal is a special journal dedicated to recording all credit sales of merchandise to customers.
Question 5: A prepaid insurance payment of $1,200 for 12 months is recorded. After one month, the adjusting entry would be:
- Debit Insurance Expense $100; Credit Prepaid Insurance $100 (Correct answer)
- Debit Prepaid Insurance $100; Credit Insurance Expense $100
- Debit Insurance Expense $1,200; Credit Cash $1,200
- Debit Cash $100; Credit Insurance Expense $100
Correct answer: Debit Insurance Expense $100; Credit Prepaid Insurance $100
Each month, $100 of prepaid insurance expires and becomes an expense ($1,200 ÷ 12), reducing the prepaid asset and recognizing the expense.
Question 6: What is the normal balance of the Accounts Receivable account?
- Debit (Correct answer)
- Credit
- Either debit or credit
- Zero
Correct answer: Debit
Accounts Receivable is an asset account, and all asset accounts carry a normal debit balance.
Question 7: A business receives a $2,000 advance payment from a customer. The correct journal entry is:
- Debit Cash $2,000; Credit Unearned Revenue $2,000 (Correct answer)
- Debit Cash $2,000; Credit Revenue $2,000
- Debit Unearned Revenue $2,000; Credit Cash $2,000
- Debit Accounts Receivable $2,000; Credit Revenue $2,000
Correct answer: Debit Cash $2,000; Credit Unearned Revenue $2,000
Cash received before services are rendered creates a liability (Unearned Revenue) because the business still owes the customer the service.
CPB / BookKeeping Bookkeeping Journal 3
What does it mean to 'post' a journal entry?