CPB / BookKeeping Journalizing and Posting Transactions 2 — Questions and Answers
Question 1: When a business purchases supplies on account, which journal entry is correct?
- Debit Supplies Expense, Credit Cash
- Debit Supplies, Credit Accounts Payable (Correct answer)
- Debit Accounts Payable, Credit Supplies
- Debit Cash, Credit Supplies
Correct answer: Debit Supplies, Credit Accounts Payable
Purchasing supplies on account increases the Supplies asset (debit) and creates a liability in Accounts Payable (credit).
Question 2: A compound journal entry is one that:
- Records only a single debit and single credit
- Involves more than two accounts (Correct answer)
- Is recorded only at month-end
- Corrects a previous entry error
Correct answer: Involves more than two accounts
A compound journal entry involves three or more accounts, though total debits must still equal total credits.
Question 3: After posting from the general journal, the account number is written in the journal's posting reference column to indicate:
- The page number in the ledger
- That the entry has been posted to the ledger (Correct answer)
- The balance in that account
- The date of the original transaction
Correct answer: That the entry has been posted to the ledger
Recording the ledger account number in the journal's PR column confirms the entry has been successfully posted.
Question 4: A business receives a $500 cash payment from a customer on a previously recorded account receivable. Which entry is correct?
- Debit Cash $500, Credit Revenue $500
- Debit Accounts Receivable $500, Credit Cash $500
- Debit Cash $500, Credit Accounts Receivable $500 (Correct answer)
- Debit Revenue $500, Credit Accounts Receivable $500
Correct answer: Debit Cash $500, Credit Accounts Receivable $500
Collecting on an account receivable increases Cash (debit) and reduces the Accounts Receivable asset (credit).
Question 5: In which book of original entry are most routine business transactions first recorded?
- The general ledger
- The balance sheet
- The general journal (Correct answer)
- The trial balance
Correct answer: The general journal
The general journal is the book of original entry where transactions are first recorded in chronological order.
Question 6: What does a credit entry to the owner's Capital account represent?
- A withdrawal by the owner
- An increase in owner's equity (Correct answer)
- An expense paid by the owner
- A decrease in net income
Correct answer: An increase in owner's equity
Credits increase equity accounts, so a credit to Capital increases the owner's equity stake in the business.
Question 7: An error discovered AFTER a journal entry has been posted should be corrected by:
- Erasing the original entry in both journal and ledger
- Drawing a single line through the error and rewriting
- Recording a correcting journal entry (Correct answer)
- Voiding the transaction and starting over
Correct answer: Recording a correcting journal entry
Once posted, errors must be corrected with a new correcting journal entry rather than altering the original records.
CPB / BookKeeping Journalizing and Posting Transactions 2
When a business purchases supplies on account, which journal entry is correct?