CPB / BookKeeping Double Entry Bookkeeping 5

Question 1

Which of the following best describes a compound journal entry?

Accepted Answer

An entry involving more than two accounts

Answer

A compound journal entry involves three or more accounts, with total debits still equaling total credits.

Question 2

On a balance sheet, which section lists accounts in order of liquidity?

Accepted Answer

Current assets

Answer

Current assets are listed in order of liquidity—most liquid (cash) first—reflecting how quickly each asset can be converted to cash.

Question 3

When a business receives a $3,000 bank loan, the journal entry credits:

Accepted Answer

Notes Payable

Answer

Borrowing money increases Cash (debit) and creates an obligation recorded as Notes Payable (credit).

Question 4

What does a credit balance in an Accounts Receivable account most likely indicate?

Accepted Answer

The company owes a customer a refund or credit

Answer

A credit balance in Accounts Receivable typically means a customer has overpaid or a credit memo was issued, resulting in a refund owed to the customer.

Question 5

Which of the following correctly states the normal balance for each account type?

Accepted Answer

Assets: Debit; Liabilities: Credit; Equity: Credit

Answer

Assets have a normal debit balance; liabilities and equity have normal credit balances, consistent with the accounting equation.

CPB / BookKeeping Practice Test

CPB / BookKeeping Practice Test

CPB / BookKeeping Double Entry Bookkeeping 5