CPB General Ledger & Chart of Accounts 1 — Questions and Answers
Question 1: What is the primary purpose of a chart of accounts?
- To list all transactions in chronological order
- To provide a systematic listing of all accounts used in the general ledger (Correct answer)
- To summarize the financial position of a business
- To record the balances of all vendor invoices
Correct answer: To provide a systematic listing of all accounts used in the general ledger
A chart of accounts is an organized listing of all accounts used in the general ledger, providing a framework for recording financial transactions.
Question 2: In double-entry bookkeeping, which account type normally carries a credit balance?
- Assets
- Expenses
- Liabilities (Correct answer)
- Dividends
Correct answer: Liabilities
Liabilities normally carry credit balances because they represent amounts owed by the business, and credits increase liability accounts.
Question 3: What is the general ledger in a bookkeeping system?
- A daily log of all cash receipts
- A record of all vendor and customer balances
- The master set of accounts that contains all financial transactions of a business (Correct answer)
- A list of outstanding checks and deposits
Correct answer: The master set of accounts that contains all financial transactions of a business
The general ledger is the master accounting record containing all account balances, with entries posted from journals and used to prepare financial statements.
Question 4: Which type of account is increased by a debit entry?
- Revenue accounts
- Liability accounts
- Asset accounts (Correct answer)
- Equity accounts
Correct answer: Asset accounts
Asset accounts have a normal debit balance, so debit entries increase their balances and credit entries decrease them.
Question 5: What is a subsidiary ledger?
- A backup copy of the general ledger kept offsite
- A detailed ledger that supports and breaks down the balance of a controlling account in the general ledger (Correct answer)
- A ledger used only for payroll transactions
- A temporary ledger closed at the end of each month
Correct answer: A detailed ledger that supports and breaks down the balance of a controlling account in the general ledger
A subsidiary ledger provides transaction-level detail for individual accounts (such as each customer or vendor) that roll up to a controlling account in the general ledger.
Question 6: Which of the following is considered a permanent (real) account?
- Sales Revenue
- Wages Expense
- Accumulated Depreciation (Correct answer)
- Dividends Declared
Correct answer: Accumulated Depreciation
Accumulated Depreciation is a balance sheet account (a contra-asset) that carries its balance forward from period to period, making it a permanent account.
Question 7: What is the normal balance for accounts payable in the general ledger?
- Debit
- Credit (Correct answer)
- Zero
- Either debit or credit depending on the period
Correct answer: Credit
Accounts payable is a liability account, and liabilities normally carry credit balances because credits increase liability account balances.
CPB General Ledger & Chart of Accounts 1
What is the primary purpose of a chart of accounts?