CPB General Ledger & Chart of Accounts 3

Question 1

What is the fundamental accounting equation that underpins general ledger bookkeeping?

Accepted Answer

Assets = Liabilities + Owner's Equity

Answer

The accounting equation Assets = Liabilities + Owner's Equity must always remain in balance and is the foundation of double-entry bookkeeping.

Question 2

What is the purpose of an adjusting entry in the general ledger?

Accepted Answer

To update account balances for accruals, deferrals, and depreciation before preparing financial statements

Answer

Adjusting entries ensure revenues and expenses are recognized in the correct accounting period under the accrual basis, updating accounts before financial statements are prepared.

Question 3

Which of the following is a temporary (nominal) account?

Accepted Answer

Rent Expense

Answer

Rent Expense is a temporary account that accumulates expenses during the period and is closed to retained earnings (or income summary) at period end.

Question 4

What happens to temporary account balances at the end of an accounting period?

Accepted Answer

They are zeroed out through closing entries and their net effect is transferred to equity

Answer

Closing entries zero out all temporary accounts (revenues, expenses, dividends) and transfer their net balance to retained earnings so the income statement starts fresh each period.

Question 5

What is a compound journal entry?

Accepted Answer

An entry that involves more than one debit or more than one credit

Answer

A compound journal entry involves two or more debits, two or more credits, or both, as long as total debits still equal total credits.

CPB - Certified Public Bookkeeper Practice Test

CPB - Certified Public Bookkeeper Practice Test

CPB General Ledger & Chart of Accounts 3