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CPB Bookkeeper study materials
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CPB Bookkeeper practice questions

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Question 1Bookkeeping

Which equation expresses the fundamental accounting relationship?

  1. Assets + Liabilities = Owner's equity
  2. Assets = Liabilities − Owner's equity
  3. Assets = Liabilities + Owner's equity Correct answer.
  4. Owner's equity = Assets + Liabilities

Explanation

The accounting equation states that total assets equal total liabilities plus owner's equity. It is the basis for the balance sheet and every double-entry transaction.

Question 2Bookkeeping

What is the normal balance of an asset account?

  1. Either debit or credit depending on the month
  2. Zero
  3. Debit Correct answer.
  4. Credit

Explanation

Asset accounts increase with debits and therefore carry a normal debit balance. Expenses and drawings also have debit balances.

Question 3Bookkeeping

A bookkeeper records transactions in the general journal primarily to

  1. Prepare the balance sheet directly
  2. Summarize ending account balances
  3. Replace the general ledger
  4. Record transactions in date order Correct answer.

Explanation

The general journal is the book of original entry, where transactions are recorded in chronological order before posting to ledgers.

Question 4Bookkeeping

The primary purpose of a trial balance is to

  1. Verify debits equal credits Correct answer.
  2. Determine net income for the period
  3. Prove every transaction was recorded
  4. Report cash flows from operations

Explanation

A trial balance lists ledger account balances and tests whether total debits equal total credits. It cannot detect errors that keep debits and credits equal, such as a posting to the wrong account.

Question 5Bookkeeping

Under cash-basis accounting, revenue is recorded when

  1. The sale is invoiced
  2. The service is performed
  3. Cash is received Correct answer.
  4. The customer places an order

Explanation

Cash-basis accounting recognizes revenue when cash is received and expenses when cash is paid. It ignores when the sale is invoiced or the service is performed.

Question 6Bookkeeping

Which item is a liability?

  1. Owner's drawing
  2. Prepaid insurance
  3. Accounts payable Correct answer.
  4. Equipment

Explanation

Accounts payable represents an obligation to pay a supplier and is reported as a liability. Prepaid insurance and equipment are assets, and drawings reduce equity.

Question 7Bookkeeping

Which document would typically serve as the source document for recording a purchase on account?

  1. Supplier invoice Correct answer.
  2. Trial balance
  3. Bank reconciliation
  4. Adjusting entry

Explanation

A supplier invoice documents a credit purchase and provides the details needed to journalize it. Source documents support the accuracy and existence of recorded transactions.

Question 8Bookkeeping

Owner's equity increases when

  1. The owner withdraws cash
  2. The owner invests cash in the business Correct answer.
  3. Liabilities increase with no asset change
  4. Expenses exceed revenues

Explanation

Owner investments increase owner's equity because the owner's claim on the business grows. Withdrawals and net losses reduce equity.

Question 9Bookkeeping

A company pays $2,400 on October 1 for six months of rent in advance and records it as Prepaid Rent. The December 31 adjusting entry should include

  1. A debit to Cash for $1,200
  2. A credit to Rent Expense for $2,400
  3. A debit to Prepaid Rent for $1,200
  4. A debit to Rent Expense for $1,200 Correct answer.

Explanation

Three months of coverage (October through December) have expired at $400 per month, totaling $1,200. The adjustment debits Rent Expense and credits Prepaid Rent.

Question 10Bookkeeping

A client pays $6,000 in advance for 12 months of service beginning March 1. By December 31, how much should be recognized as revenue if adjustments are made monthly?

  1. $6,000
  2. $5,000 Correct answer.
  3. $1,000
  4. $500

Explanation

The $6,000 prepayment covers twelve months at $500 per month. Ten months (March through December) have been earned, so $5,000 is revenue and $1,000 remains unearned.

Question 11Bookkeeping

Equipment costing $18,000 with a $3,000 salvage value and a 5-year life is depreciated straight-line. What is annual depreciation?

  1. $3,000 Correct answer.
  2. $4,500
  3. $3,600
  4. $2,500

Explanation

Straight-line depreciation is (cost − salvage value) ÷ useful life. ($18,000 − $3,000) ÷ 5 years = $3,000 per year.

Question 12Bookkeeping

In a bank reconciliation, outstanding checks are

  1. Add to the book balance
  2. Subtract from the book balance
  3. Add to the bank balance
  4. Subtract from the bank balance Correct answer.

Explanation

Outstanding checks have been recorded in the company's books but have not yet cleared the bank, so the bank balance is higher than the true available balance. They are subtracted from the bank statement balance on the reconciliation.

Question 13Bookkeeping

A petty cash fund of $200 has receipts totaling $175 and cash on hand of $25. To replenish the fund, the entry includes

  1. A credit to Cash Over and Short for $175
  2. A debit to various expenses for $175 Correct answer.
  3. A debit to Petty Cash for $175
  4. A credit to Cash for $25

Explanation

Replenishing the fund debits the expense accounts for the receipts and credits Cash for the same amount. The Petty Cash account stays at its established $200 balance.

Question 14Bookkeeping

Which payroll item is an employer-only expense in addition to gross wages?

  1. Federal income tax withholding
  2. Net pay
  3. Employee's share of FICA taxes
  4. Employer's share of FICA taxes Correct answer.

Explanation

The employer must match the employee's FICA taxes, and that match is an employer payroll tax expense. Federal income tax and the employee's FICA share are withheld from the employee's wages and are liabilities until remitted.

Question 15Bookkeeping

A retailer sells goods for $1,000 plus 6% sales tax and collects $1,060. The journal entry includes

  1. Debit Sales Tax Payable $60
  2. Credit Sales Tax Payable $60 and Sales $1,000 Correct answer.
  3. Credit Sales for $1,060
  4. Debit Sales for $1,060

Explanation

The sale splits into $1,000 of Sales and $60 of sales tax collected for the government. The entry debits Cash $1,060 and credits Sales $1,000 and Sales Tax Payable $60.

Question 16Bookkeeping

Which account is closed at the end of the accounting period?

  1. Accumulated depreciation
  2. Accounts receivable
  3. Prepaid insurance
  4. Service revenue Correct answer.

Explanation

Revenue, expense, Income Summary, and drawing accounts are temporary and are closed each period. Asset, contra-asset, liability, and equity accounts carry their balances forward.

Question 17Bookkeeping

Using the allowance method, writing off a specific uncollectible account

  1. Reduces A/R and the allowance account Correct answer.
  2. Reduces cash
  3. Increases owner's equity
  4. Increases bad debt expense

Explanation

Under the allowance method, a write-off debits Allowance for Doubtful Accounts and credits Accounts Receivable. The expense was recognized when the allowance was established, so the write-off does not affect net income.

Question 18Bookkeeping

During a period of rising prices, which inventory method generally produces the highest ending inventory?

  1. FIFO Correct answer.
  2. LIFO
  3. Weighted average
  4. Specific identification

Explanation

FIFO assigns the oldest costs to cost of goods sold and leaves the newest costs in ending inventory. When prices are rising, those newest costs are higher, so ending inventory is highest under FIFO.

Question 19Bookkeeping

The accounts receivable subsidiary ledger

  1. Shows each customer's balance Correct answer.
  2. Is used only for cash sales
  3. Contains only the total A/R balance
  4. Replaces the general ledger

Explanation

The subsidiary ledger contains the individual customer accounts, and its total should equal the accounts receivable control account in the general ledger. It provides detail without replacing the general ledger.

Question 20Bookkeeping

A $12,000, 8%, 90-day note is outstanding for 30 days at month end. The accrued interest adjustment is approximately

  1. $80 Correct answer.
  2. $960
  3. $240
  4. $160

Explanation

Interest accrues for the 30 days the note has been outstanding. $12,000 × 8% × 30/360 = $80.

Question 21Bookkeeping

A bookkeeper debited Equipment $5,000 and credited Cash $5,000 for a $5,000 cash purchase of equipment. Later it is discovered the equipment should have been debited for $50,000. What correcting entry is needed?

  1. Debit Equipment $45,000 and credit Cash $45,000 Correct answer.
  2. Debit Equipment $50,000 and credit Cash $50,000
  3. No entry; the trial balance will not balance
  4. Debit Cash $45,000 and credit Equipment $45,000

Explanation

The original entry recorded only $5,000 of equipment and cash when $50,000 should have been recorded. The correcting entry debits Equipment and credits Cash for the $45,000 difference.

Question 22Bookkeeping

Weekly payroll of $7,000 for a five-day workweek is paid each Friday. December 31 falls on Wednesday. The adjusting entry on December 31 includes

  1. A debit to Wages Expense for $4,200 Correct answer.
  2. A credit to Wages Payable for $7,000
  3. A debit to Wages Expense for $7,000
  4. A debit to Wages Payable for $2,800

Explanation

By Wednesday, employees have earned three of the five days in the workweek. $7,000 × 3/5 = $4,200, recorded as Wages Expense and Wages Payable.

Question 23Bookkeeping

The bank statement shows a $50 service charge and a $300 NSF check; the bookkeeper has not recorded either. The bank reconciliation will

  1. Subtract $350 from the book balance Correct answer.
  2. Add $350 to the bank balance
  3. Subtract $50 from the bank balance only
  4. Add $300 to the book balance

Explanation

Service charges and NSF checks are items the bank knows about but the company has not yet recorded. They are subtracted from the book balance in the reconciliation.

Question 24Bookkeeping

If ending inventory is overstated at year end, what is the effect on that year's financial statements?

  1. Cost of goods sold is understated and net income overstated Correct answer.
  2. Cost of goods sold is overstated and net income understated
  3. Cost of goods sold is understated and net income understated
  4. Assets are understated and equity overstated

Explanation

Overstating ending inventory reduces cost of goods sold because more cost remains in inventory. Lower cost of goods sold raises gross profit and net income for the year.

Question 25Bookkeeping

Which control best reduces the risk of a bookkeeper concealing theft of cash receipts?

  1. Letting one bookkeeper record and deposit cash
  2. Having the bookkeeper prepare the bank reconciliation
  3. Separating cash custody from recordkeeping Correct answer.
  4. Using only cash payments for expenses

Explanation

Segregation of duties prevents one person from both handling cash and controlling its records, which makes concealment harder. Independent reconciliation provides an additional check on cash receipts.

Question 26Bookkeeping

Which equation correctly states the accounting equation solved for liabilities?

  1. Liabilities = Owner's Equity ÷ Assets
  2. Liabilities = Assets − Owner's Equity Correct answer.
  3. Liabilities = Assets + Owner's Equity
  4. Liabilities = Owner's Equity − Assets

Explanation

The accounting equation is Assets = Liabilities + Owner's Equity. Rearranging it to isolate liabilities gives Liabilities = Assets − Owner's Equity. Addition and subtraction are the only operations involved; the equation is never rearranged by division.

Question 27Bookkeeping

The normal balance of the Cash account is

  1. It has no normal balance
  2. Credit, until the account is closed
  3. Credit
  4. Debit Correct answer.

Explanation

Cash is an asset, and asset accounts increase on the debit side. The balance is therefore normally a debit balance. A credit balance in Cash would signal an error or an overdraft.

Question 28Bookkeeping

What is the primary purpose of a trial balance?

  1. To close the temporary accounts
  2. To verify that total debits equal total credits Correct answer.
  3. To report financial position to creditors
  4. To determine the net income for the period

Explanation

A trial balance lists all ledger balances in debit and credit columns and confirms that the two column totals agree. It is a bookkeeping check, not a financial statement. Equal totals do not guarantee that no errors were made.

Question 29Bookkeeping

Amounts recorded in the general journal are transferred to the general ledger by

  1. Footing
  2. Posting Correct answer.
  3. Adjusting
  4. Closing

Explanation

Posting is the process of copying each journal entry's debits and credits into the appropriate ledger accounts. Journalizing records the transaction first; posting then updates the account balances.

Question 30Bookkeeping

Which account increases when it is credited?

  1. Equipment
  2. Fees Earned Correct answer.
  3. Cash
  4. Owner's Drawing

Explanation

Revenue accounts such as Fees Earned have a credit normal balance, so a credit increases them. Assets and drawing accounts increase with debits.

Question 31Bookkeeping

Accumulated Depreciation - Equipment is best classified as

  1. A contra asset account Correct answer.
  2. An expense account
  3. A contra owner's equity account
  4. A liability account

Explanation

Accumulated depreciation is offset against the related asset on the balance sheet, so it is a contra asset account with a credit balance. It is not itself a liability because it creates no obligation to an outside party.

Question 32Bookkeeping

Which document does a seller send to a buyer to show a reduction in the amount owed for returned merchandise?

  1. Purchase order
  2. Debit memorandum
  3. Remittance advice
  4. Credit memorandum Correct answer.

Explanation

A credit memorandum issued by the seller reduces the buyer's account receivable and informs the buyer that their balance has been reduced. It is the seller's record of the allowance or return.

Question 33Bookkeeping

A business reports its results for the twelve months ending June 30 each year. That reporting period is a

  1. Calendar year
  2. Interim period
  3. Natural business year
  4. Fiscal year Correct answer.

Explanation

A fiscal year is any twelve-month accounting period that ends on a date other than December 31. A calendar year always ends December 31. Interim periods are shorter than a full year.

Question 34Bookkeeping

An owner invests $10,000 cash and equipment valued at $4,000 in the business. Which entry records the investment?

  1. Debit Owner's Capital $14,000; credit Cash $10,000; credit Equipment $4,000
  2. Debit Cash $14,000; credit Equipment $4,000; credit Owner's Capital $10,000
  3. Debit Cash $10,000; debit Equipment $4,000; credit Owner's Capital $14,000 Correct answer.
  4. Debit Cash $10,000; debit Equipment $4,000; credit Owner's Drawing $14,000

Explanation

Assets contributed by the owner increase assets and increase owner's equity. The assets are debited at their agreed value and the total is credited to the capital account. Drawing is used only for withdrawals.

Question 35Bookkeeping

A company buys $5,000 of merchandise on account with terms 2/10, n/30 and pays the full invoice within the discount period. How much cash is paid?

  1. $4,000
  2. $4,900 Correct answer.
  3. $5,000
  4. $4,950

Explanation

The term 2/10 means a 2% discount is allowed if payment is made within ten days. Two percent of $5,000 is $100, so the cash paid is $4,900. The n/30 portion only sets the final due date if the discount is missed.

Question 36Bookkeeping

In a bank reconciliation, a deposit in transit is

  1. Added to the bank statement balance Correct answer.
  2. Deducted from the book balance
  3. Added to the book balance
  4. Deducted from the bank statement balance

Explanation

A deposit in transit has already been recorded by the company but has not yet appeared on the bank statement. It is therefore added to the bank side of the reconciliation to bring the bank balance up to date.

Question 37Bookkeeping

Supplies costing $1,200 were bought during the year and debited to Supplies. A year-end count shows $450 still on hand. What is the adjusting entry?

  1. Debit Supplies Expense $450; credit Supplies $450
  2. Debit Supplies Expense $1,200; credit Supplies $1,200
  3. Debit Supplies Expense $750; credit Supplies $750 Correct answer.
  4. Debit Supplies $750; credit Supplies Expense $750

Explanation

The amount used during the year is $1,200 − $450 = $750, which becomes an expense. The entry debits Supplies Expense and credits Supplies so the asset account reports the $450 remaining.

Question 38Bookkeeping

Equipment costing $20,000 with a four-year life and $2,000 salvage value is depreciated using the double-declining-balance method. What is first-year depreciation?

  1. $9,000
  2. $10,000 Correct answer.
  3. $5,000
  4. $4,500

Explanation

The double-declining rate is twice the straight-line rate of 25%, or 50%. Applying 50% to the $20,000 book value gives $10,000; salvage value is not subtracted when computing the rate, only used as a floor in later years.

Question 39Bookkeeping

Beginning inventory is $12,000, purchases are $48,000, freight-in is $1,000, purchase returns are $2,000, and ending inventory is $9,000. What is cost of goods sold?

  1. $47,000
  2. $52,000
  3. $50,000 Correct answer.
  4. $49,000

Explanation

Cost of goods sold equals beginning inventory plus net purchases (purchases plus freight-in less returns) minus ending inventory. Here that is $12,000 + ($48,000 + $1,000 − $2,000) − $9,000 = $50,000.

Question 40Bookkeeping

A trial balance's debit column differs from its credit column by an amount evenly divisible by 9. This most likely indicates

  1. A transposition or slide error Correct answer.
  2. An entry posted twice to both the debit and credit accounts
  3. A journal entry that was never recorded at all
  4. An incorrect account title used for a correct amount

Explanation

Transposition (writing $540 as $450) and slide (writing $540 as $54) errors produce differences that are multiples of 9. Testing divisibility by 9 is a standard shortcut for locating them.

Question 41Bookkeeping

A company establishes a $300 petty cash fund by writing a check. What entry is made at that time?

  1. Debit Petty Cash $300; credit Cash $300 Correct answer.
  2. Debit Various Expenses $300; credit Petty Cash $300
  3. Debit Cash $300; credit Petty Cash $300
  4. Debit Petty Cash Expense $300; credit Cash $300

Explanation

Establishing the fund simply moves cash from the bank account into the petty cash box, so Petty Cash is debited and Cash is credited. Expenses are recognized later, when the fund is replenished.

Question 42Bookkeeping

An employee has gross wages of $2,000, federal income tax withheld of $250, FICA withheld of $153, and state tax withheld of $40. What is net pay?

  1. $1,597
  2. $1,847
  3. $1,710
  4. $1,557 Correct answer.

Explanation

Net pay is gross wages less all employee deductions: $2,000 − $250 − $153 − $40 = $1,557. Employer payroll taxes are an additional company cost and do not reduce the employee's net pay.

Question 43Bookkeeping

The Service Revenue account has a $40,000 credit balance at year end. Which entry closes it?

  1. Debit Service Revenue $40,000; credit Owner's Capital $40,000
  2. Debit Service Revenue $40,000; credit Retained Earnings $40,000
  3. Debit Service Revenue $40,000; credit Income Summary $40,000 Correct answer.
  4. Debit Income Summary $40,000; credit Service Revenue $40,000

Explanation

Closing a revenue account means debiting it for its balance and crediting Income Summary, which zeroes the revenue account. Income Summary is then closed to the equity account in a later step.

Question 44Bookkeeping

An aging schedule indicates that $6,500 of receivables will be uncollectible. Before adjustment, Allowance for Doubtful Accounts has a $1,200 credit balance. What is bad debt expense?

  1. $5,300 Correct answer.
  2. $7,700
  3. $1,200
  4. $6,500

Explanation

The aging schedule sets the required ending balance of the allowance at $6,500. Because $1,200 is already in the account, only $5,300 of additional expense is needed to reach that balance.

Question 45Bookkeeping

A $9,000, 6%, 120-day note is issued on a 360-day-year basis. What is its maturity value?

  1. $9,180 Correct answer.
  2. $9,060
  3. $9,000
  4. $9,540

Explanation

Interest is principal × rate × time, or $9,000 × 0.06 × 120/360 = $180. Maturity value is principal plus interest, which is $9,180.

Question 46Bookkeeping

A bookkeeper receives $900 from a customer on account and records a debit to Cash of $900 and a credit to Sales of $900. What is the effect on the year-end statements?

  1. Net income and accounts receivable are both understated by $900
  2. Assets are overstated by $900 and net income is correct
  3. Net income is overstated by $900 and accounts receivable is correct
  4. Net income and accounts receivable are both overstated by $900 Correct answer.

Explanation

The credit should have gone to Accounts Receivable, so that account was never reduced and is overstated by $900. Crediting Sales instead also records revenue that was earned in an earlier period, overstating revenue and net income by the same $900. Cash itself was recorded correctly.

Question 47Bookkeeping

On November 1 a company pays $4,800 for six months of insurance and debits Insurance Expense for the full amount. No adjustments have been made. What is the December 31 adjusting entry?

  1. Debit Insurance Expense $1,600; credit Prepaid Insurance $1,600
  2. Debit Prepaid Insurance $1,600; credit Insurance Expense $1,600
  3. Debit Prepaid Insurance $4,800; credit Insurance Expense $4,800
  4. Debit Prepaid Insurance $3,200; credit Insurance Expense $3,200 Correct answer.

Explanation

The premium is $800 per month, and two months have expired by December 31, so $1,600 is expense and $3,200 relates to future periods. Because the full amount was expensed originally, the adjustment must move $3,200 back to the asset account.

Question 48Bookkeeping

A bank statement shows a balance of $12,400. The book balance is $11,125. Outstanding checks total $1,800, deposits in transit total $900, the bank charged a $25 service fee, an NSF check was $200, and the bank collected a $600 note for the company. What is the adjusted cash balance?

  1. $11,525
  2. $13,300
  3. $11,500 Correct answer.
  4. $10,600

Explanation

The bank side is $12,400 − $1,800 + $900 = $11,500. The book side is $11,125 − $25 − $200 + $600 = $11,500, and the two sides agree. Either side of a correct reconciliation can be used to report the adjusted cash balance.

Question 49Bookkeeping

At year end a company fails to record $1,500 of wages earned by employees but not yet paid. What is the effect on the year-end statements?

  1. Assets are overstated and liabilities are understated
  2. Liabilities are understated and net income is overstated Correct answer.
  3. Expenses are overstated and liabilities are understated
  4. Liabilities are overstated and net income is understated

Explanation

Accrued wages are an obligation at year end, so omitting them understates liabilities and understates wage expense. Understating an expense overstates net income and, in turn, owner's equity.

Question 50Bookkeeping

A company collected $50,000 from customers during the year. Accounts receivable increased by $6,000 and Unearned Revenue decreased by $2,000. What is accrual-basis revenue?

  1. $42,000
  2. $46,000
  3. $50,000
  4. $58,000 Correct answer.

Explanation

Revenue equals cash collected plus the increase in receivables, plus the decrease in unearned revenue that was earned this period. That gives $50,000 + $6,000 + $2,000 = $58,000, because $6,000 of revenue was not yet collected and $2,000 collected earlier was earned now.