CPB / BookKeeping Bookkeeping Ledger 3 — Questions and Answers
Question 1: What is a 'chart of accounts' in relation to the ledger?
- A list of all journal entries
- A numbered list of all accounts used in the general ledger (Correct answer)
- A summary of the trial balance
- A record of all bank transactions
Correct answer: A numbered list of all accounts used in the general ledger
The chart of accounts is a numbered listing of all accounts used in a company's general ledger, serving as an index to the ledger.
Question 2: Which ledger account type normally carries a credit balance?
- Equipment
- Prepaid Insurance
- Unearned Revenue (Correct answer)
- Accounts Receivable
Correct answer: Unearned Revenue
Unearned Revenue is a liability account and normally carries a credit balance, representing money received before services are performed.
Question 3: What happens to permanent ledger accounts at the end of an accounting period?
- They are closed to zero
- They carry their balances forward to the next period (Correct answer)
- They are transferred to the income summary
- They are removed from the ledger
Correct answer: They carry their balances forward to the next period
Permanent (real) accounts — assets, liabilities, and equity — retain their ending balances, which become the opening balances of the next period.
Question 4: A company posts a debit to Supplies Expense and a credit to Supplies. What type of entry is this?
- Closing entry
- Reversing entry
- Adjusting entry (Correct answer)
- Correcting entry
Correct answer: Adjusting entry
Debiting Supplies Expense and crediting Supplies is a standard adjusting entry made at period-end to record supplies used during the period.
Question 5: In ledger accounts, what does the abbreviation 'Bal.' typically indicate?
- A bank transaction
- The balance carried forward (Correct answer)
- A balance sheet entry
- A billing adjustment
Correct answer: The balance carried forward
'Bal.' in a ledger account indicates the balance carried forward, showing the net amount in the account at a specific point in time.
Question 6: Which of the following would cause a discrepancy between the general ledger and a subsidiary ledger?
- Posting a transaction to the control account but not the subsidiary ledger (Correct answer)
- Recording a transaction in the journal
- Preparing the trial balance
- Closing temporary accounts
Correct answer: Posting a transaction to the control account but not the subsidiary ledger
A discrepancy occurs when a transaction is posted to the general ledger control account but the corresponding detail is not posted to the subsidiary ledger.
Question 7: What is the normal balance of the Owner's Drawing account?
- Credit
- Debit (Correct answer)
- Zero
- It has no normal balance
Correct answer: Debit
Owner's Drawing is a contra-equity account that normally carries a debit balance, as withdrawals reduce owner's equity.
CPB / BookKeeping Bookkeeping Ledger 3
What is a 'chart of accounts' in relation to the ledger?