CPB / BookKeeping Double Entry Bookkeeping 2

Question 1

A company purchases office supplies worth $500 on account. Which accounts are affected?

Accepted Answer

Debit Office Supplies, Credit Accounts Payable

Answer

Purchasing supplies on account increases an asset (Office Supplies debit) and increases a liability (Accounts Payable credit).

Question 2

What is the accounting equation that underpins double entry bookkeeping?

Accepted Answer

Assets = Liabilities + Owner's Equity

Answer

The fundamental accounting equation is Assets = Liabilities + Owner's Equity, and every transaction must keep this equation in balance.

Question 3

When a customer pays $1,200 in advance for services to be rendered next month, the bookkeeper should:

Accepted Answer

Debit Cash, Credit Unearned Revenue

Answer

Cash received before services are performed creates a liability (Unearned Revenue) because the obligation to deliver the service still exists.

Question 4

Which entry correctly records the payment of a $2,000 liability that was previously recorded?

Accepted Answer

Debit Accounts Payable $2,000, Credit Cash $2,000

Answer

Paying off a recorded liability decreases the liability (debit Accounts Payable) and decreases cash (credit Cash).

Question 5

A firm earns $3,500 in consulting fees and immediately collects cash. The correct entry is:

Accepted Answer

Debit Cash $3,500, Credit Consulting Revenue $3,500

Answer

Collecting cash for services rendered increases the asset Cash (debit) and increases revenue (credit).

CPB / BookKeeping Practice Test