CPB / BookKeeping Study Guide 2026

Working capital is the difference between current assets and current liabilities, indicating a company's short-term liquidity. Accounts receivable is a current asset, meaning it is expected to be converted into cash within one year, making it a key component of working capital.

A ledger is indeed a comprehensive collection of all the individual financial accounts used by a business. It serves as a repository where all transactions affecting a specific asset, liability, equity, revenue, or expense account are summarized. This organized collection allows for the calculation of account balances and the preparation of financial statements.

After applying the standard 5.4% SUTA credit, the net FUTA rate is 0.6% on the first $7,000 of wages.

The Income Statement (also called the Profit and Loss Statement) reports revenues and expenses for a defined accounting period.

Temporary accounts — revenues, expenses, and dividends — are closed to Retained Earnings at period end.

Purchasing inventory on credit increases the Inventory asset (debit) and creates an obligation recorded as Accounts Payable (credit).