CPB / BookKeeping Journalizing and Posting Transactions 4 — Questions and Answers
Question 1: If a $200 utility bill is paid in cash but recorded as a debit to Accounts Payable and credit to Cash, the error will cause:
- Utilities Expense to be overstated
- Accounts Payable to be understated
- Accounts Payable to be overstated and Utilities Expense understated (Correct answer)
- Cash to be overstated
Correct answer: Accounts Payable to be overstated and Utilities Expense understated
Debiting Accounts Payable instead of Utilities Expense leaves Accounts Payable incorrectly reduced and Utilities Expense not recorded at all.
Question 2: A transposition error occurs when:
- A transaction is posted to the wrong account
- Digits within a number are reversed (e.g., $459 written as $495) (Correct answer)
- An entire journal entry is omitted
- The debit and credit amounts are swapped
Correct answer: Digits within a number are reversed (e.g., $459 written as $495)
A transposition error reverses the order of digits in a number, such as writing $459 as $495, and is often detectable because the difference is divisible by 9.
Question 3: When equipment worth $5,000 is purchased by paying $2,000 cash and financing the rest on account, the journal entry includes:
- Debit Equipment $5,000, Credit Cash $5,000
- Debit Equipment $5,000, Credit Cash $2,000 and Credit Accounts Payable $3,000 (Correct answer)
- Debit Equipment $2,000, Debit Accounts Payable $3,000, Credit Cash $5,000
- Debit Cash $2,000, Debit Accounts Payable $3,000, Credit Equipment $5,000
Correct answer: Debit Equipment $5,000, Credit Cash $2,000 and Credit Accounts Payable $3,000
The full cost of the equipment ($5,000) is debited, with partial payment from Cash ($2,000) and the balance owed to Accounts Payable ($3,000).
Question 4: The folio column in a general journal serves what purpose?
- Records the monetary amount of each entry
- Contains the account numbers used as cross-references to the ledger (Correct answer)
- Lists the names of employees who approved transactions
- Tracks cumulative account balances
Correct answer: Contains the account numbers used as cross-references to the ledger
The folio (or posting reference) column in the journal holds ledger account numbers, linking each journal line to its ledger account.
Question 5: A business receives $600 in advance for services not yet performed. This is recorded as:
- Debit Cash, Credit Service Revenue
- Debit Unearned Revenue, Credit Cash
- Debit Cash, Credit Unearned Revenue (Correct answer)
- Debit Service Revenue, Credit Cash
Correct answer: Debit Cash, Credit Unearned Revenue
Cash received before earning it creates Unearned Revenue, a liability, because the business still owes the service to the customer.
Question 6: Which of the following would NOT appear in a standard general journal entry?
- Date of the transaction
- Account names and debit/credit amounts
- Current account balances after posting (Correct answer)
- Brief description of the transaction
Correct answer: Current account balances after posting
General journal entries include the date, accounts, amounts, and a description, but do NOT show running account balances — that information is in the ledger.
Question 7: If total debits in the trial balance do not equal total credits, the bookkeeper should first:
- Prepare financial statements immediately
- Re-add the debit and credit columns of the trial balance (Correct answer)
- Close all temporary accounts
- Prepare adjusting entries
Correct answer: Re-add the debit and credit columns of the trial balance
The first step is to re-add the trial balance columns to rule out a simple arithmetic error before investigating further.
CPB / BookKeeping Journalizing and Posting Transactions 4
If a $200 utility bill is paid in cash but recorded as a debit to Accounts Payable and credit to Cash, the error will cause: