CPB / BookKeeping Double Entry Bookkeeping 2 — Questions and Answers
Question 1: A company purchases office supplies worth $500 on account. Which accounts are affected?
- Debit Office Supplies, Credit Cash
- Debit Accounts Payable, Credit Office Supplies
- Debit Office Supplies, Credit Accounts Payable (Correct answer)
- Debit Cash, Credit Office Supplies
Correct answer: Debit Office Supplies, Credit Accounts Payable
Purchasing supplies on account increases an asset (Office Supplies debit) and increases a liability (Accounts Payable credit).
Question 2: What is the accounting equation that underpins double entry bookkeeping?
- Assets = Liabilities + Revenue
- Assets + Equity = Liabilities
- Assets = Liabilities + Owner's Equity (Correct answer)
- Revenue - Expenses = Assets
Correct answer: Assets = Liabilities + Owner's Equity
The fundamental accounting equation is Assets = Liabilities + Owner's Equity, and every transaction must keep this equation in balance.
Question 3: When a customer pays $1,200 in advance for services to be rendered next month, the bookkeeper should:
- Debit Cash, Credit Service Revenue
- Debit Cash, Credit Unearned Revenue (Correct answer)
- Debit Unearned Revenue, Credit Cash
- Debit Accounts Receivable, Credit Revenue
Correct answer: Debit Cash, Credit Unearned Revenue
Cash received before services are performed creates a liability (Unearned Revenue) because the obligation to deliver the service still exists.
Question 4: Which entry correctly records the payment of a $2,000 liability that was previously recorded?
- Debit Cash $2,000, Credit Accounts Payable $2,000
- Debit Accounts Payable $2,000, Credit Cash $2,000 (Correct answer)
- Debit Expense $2,000, Credit Cash $2,000
- Debit Accounts Payable $2,000, Credit Revenue $2,000
Correct answer: Debit Accounts Payable $2,000, Credit Cash $2,000
Paying off a recorded liability decreases the liability (debit Accounts Payable) and decreases cash (credit Cash).
Question 5: A firm earns $3,500 in consulting fees and immediately collects cash. The correct entry is:
- Debit Revenue $3,500, Credit Cash $3,500
- Debit Accounts Receivable $3,500, Credit Revenue $3,500
- Debit Cash $3,500, Credit Consulting Revenue $3,500 (Correct answer)
- Debit Cash $3,500, Credit Accounts Payable $3,500
Correct answer: Debit Cash $3,500, Credit Consulting Revenue $3,500
Collecting cash for services rendered increases the asset Cash (debit) and increases revenue (credit).
Question 6: The left side of a T-account is always the:
- Credit side
- Balance side
- Debit side (Correct answer)
- Liability side
Correct answer: Debit side
By convention, the left side of any T-account is always the debit side, regardless of the account type.
Question 7: If total debits in a trial balance equal $85,000, what must total credits equal?
- $42,500
- $170,000
- $85,000 (Correct answer)
- It depends on the number of accounts
Correct answer: $85,000
The trial balance is in balance only when total debits equal total credits, so both sides must equal $85,000.
CPB / BookKeeping Double Entry Bookkeeping 2
A company purchases office supplies worth $500 on account.
Which accounts are affected?