IAB Financial Accounting & Reporting 3

Question 1

When a business purchases supplies on credit, the correct journal entry is:

Accepted Answer

Debit Supplies, Credit Accounts Payable

Answer

Purchasing supplies on credit increases Supplies (debit) and creates a liability in Accounts Payable (credit).

Question 2

Which accounting principle requires expenses to be recorded in the same period as the revenues they help generate?

Accepted Answer

Matching Principle

Answer

The Matching Principle dictates that expenses should be recognized in the same accounting period as the related revenues.

Question 3

A company collects $2,000 cash in advance for services to be performed next month. How should this be recorded?

Accepted Answer

Debit Cash $2,000; Credit Unearned Revenue $2,000

Answer

Cash received before services are rendered creates a liability (Unearned Revenue) until the service is performed.

Question 4

Which of the following is NOT a component of the income statement?

Accepted Answer

Retained Earnings

Answer

Retained Earnings appears on the balance sheet and the statement of retained earnings, not the income statement.

Question 5

The straight-line depreciation method calculates annual depreciation as:

Accepted Answer

(Cost − Salvage Value) ÷ Useful Life

Answer

Straight-line depreciation spreads the depreciable cost (Cost minus Salvage Value) evenly over the asset's useful life.

(IAB) International Association of Bookkeepers Certification Practice Test