Download CB Certified Bookkeeper Practice Exam: Questions and Answers and more Exams Technology in PDF only on Docsity!
Question 1. What is the fundamental accounting equation? A) Assets = Liabilities – Equity B) Assets = Liabilities + Equity C) Assets + Liabilities = Equity D) Equity = Assets – Liabilities Answer: B Explanation: The accounting equation states that a company’s resources (Assets) are financed by liabilities and owners’ equity, expressed as Assets = Liabilities + Equity. Question 2. In double‑entry bookkeeping, a debit to an asset account will: A) Increase the asset balance B) Decrease the asset balance C) Have no effect on the asset balance D) Increase a liability account Answer: A Explanation: Asset accounts have a natural debit balance; debiting them increases the balance. Question 3. Which of the following best describes accrual basis accounting? A) Revenue is recorded when cash is received. B) Expenses are recorded when cash is paid.
C) Revenue is recorded when earned, regardless of cash receipt. D) All transactions are recorded only at year‑end. Answer: C Explanation: Under accrual accounting, revenues and expenses are recognized when earned or incurred, not when cash changes hands. Question 4. GAAP requires that financial statements be prepared on which of the following assumptions? A) Going concern B) Historical cost only C) Cash basis only D) Tax basis Answer: A Explanation: The going‑concern assumption presumes the entity will continue operating in the foreseeable future, a core GAAP principle. Question 5. When designing a Chart of Accounts, which numbering system is most commonly used for assets? A) 1000‑ 1999 B) 2000‑ 2999 C) 3000‑ 3999 D) 4000‑ 4999
Question 8. Which legal structure typically reports income on the owner’s personal tax return using Schedule C? A) C‑Corporation B) S‑Corporation C) Partnership D) Sole Proprietorship Answer: D Explanation: Sole proprietors report business income on Schedule C of their personal Form 1040. Question 9. An EIN is primarily used for: A) Identifying a sole proprietor’s SSN for payroll B) Identifying a business entity for tax purposes C) Tracking personal credit scores D) Filing state income tax returns only Answer: B Explanation: The Employer Identification Number uniquely identifies a business entity for federal tax administration. Question 10. When a retailer collects sales tax from a customer, the tax liability is recorded as a:
A) Revenue B) Asset C) Liability D) Equity Answer: C Explanation: Sales tax collected is a liability because the business must remit it to the taxing authority. Question 11. A sales invoice to a customer should be recorded with a debit to: A) Sales Revenue B) Accounts Receivable C) Cash D) Sales Tax Payable Answer: B Explanation: The invoice creates a receivable; therefore, Accounts Receivable is debited, and Sales Revenue is credited. Question 12. When a customer pays an outstanding invoice in cash, which entry is correct? A) Debit Cash, Credit Accounts Receivable B) Debit Accounts Receivable, Credit Cash
Answer: B Explanation: The purchase creates a liability (Accounts Payable) and an asset (Office Furniture). Question 15. A payment made to a vendor that settles an outstanding bill should be recorded as: A) Debit Accounts Payable, Credit Cash B) Debit Cash, Credit Accounts Payable C) Debit Expense, Credit Cash D) Debit Cash, Credit Expense Answer: A Explanation: Paying a vendor reduces the liability (debit Accounts Payable) and reduces cash (credit). Question 16. Which of the following is a proper use of a petty‑cash fund? A) Paying employee salaries B) Purchasing inventory over $ C) Buying office stamps and coffee supplies D) Funding a marketing campaign Answer: C Explanation: Petty cash is intended for small, incidental expenses like stamps or coffee.
Question 17. Under FIFO inventory valuation, the cost of goods sold is based on: A) The most recent purchases B) The oldest inventory costs C) An average of all inventory costs D) The lowest cost items first Answer: B Explanation: FIFO (First‑In, First‑Out) assumes the earliest purchased items are sold first, so COGS reflects older costs. Question 18. If a company uses the weighted‑average method, the average cost per unit is calculated by: A) Adding beginning inventory cost to purchases and dividing by total units available B) Using the cost of the most recent purchase only C) Selecting the lowest cost among purchases D) Using the cost of the first purchase only Answer: A Explanation: Weighted‑average cost = (Beginning inventory cost + Purchases cost) ÷ (Beginning units + Purchased units).
Explanation: Depreciable base = $12,000 – $2,000 = $10,000; $10,000 ÷ 4 = $2, per year. Question 21. When disposing of a fully depreciated equipment with a sales price of $500, the entry includes a: A) Debit Cash $500, Credit Equipment $ B) Debit Cash $500, Credit Gain on Disposal $ C) Debit Cash $500, Credit Accumulated Depreciation $X D) Debit Cash $500, Credit Loss on Disposal $ Answer: B Explanation: Since the equipment’s book value is $0, the cash received is recorded as a gain on disposal. Question 22. A general journal entry to record prepaid insurance for $1, covering 12 months should be: A) Debit Prepaid Insurance $1,200; Credit Cash $1, B) Debit Insurance Expense $1,200; Credit Cash $1, C) Debit Cash $1,200; Credit Prepaid Insurance $1, D) Debit Insurance Expense $100; Credit Prepaid Insurance $ Answer: A Explanation: Prepaying creates an asset (Prepaid Insurance) and reduces cash.
Question 23. Which source document would you use to support a journal entry for a bank service charge? A) Sales invoice B) Purchase order C) Bank statement line item D) Payroll register Answer: C Explanation: Bank service charges are documented on the bank statement. Question 24. Gross wages for an hourly employee who worked 45 hours at $20/hour with overtime at 1.5× rate are: A) $ B) $ C) $1, D) $1, Answer: C Explanation: Regular pay = 40 h × $20 = $800; Overtime = 5 h × ($20 × 1.5) = $150; Total = $950 (but none of the options match). Correct answer should be $950. Correct Answer: None of the above – the correct gross wages are $950. Question 25. FICA taxes consist of Social Security (6.2%) and Medicare (1.45%). For an employee earning $3,000 in a pay period, the employee’s total FICA withholding is:
B) Form 940 C) Form W‑ 2 D) Form 1099‑NEC Answer: C Explanation: Form W‑2 reports an employee’s yearly wages, Social Security, Medicare, and tax withholdings. Question 28. Form 941 is filed: A) Annually for each employee B) Quarterly to report payroll taxes C) Monthly for sales tax D) Bi‑annually for unemployment taxes Answer: B Explanation: Form 941 is the employer’s quarterly federal payroll tax return. Question 29. State unemployment tax (SUTA) is generally: A) Paid by the employee only B) Paid by the employer only C) Shared equally between employer and employee D) Not required for any employer Answer: B
Explanation: Most states require employers to pay SUTA; employees do not contribute. Question 30. When reconciling a bank statement, a “deposit in transit” is: A) A deposit recorded by the bank but not yet by the company B) A deposit recorded by the company but not yet cleared by the bank C) An error in the bank’s ledger D) A fraudulent transaction Answer: B Explanation: Deposits in transit are amounts the company has recorded but the bank has not yet processed. Question 31. An NSF (non‑sufficient funds) check returned by the bank should be recorded by: A) Debiting Cash, crediting Accounts Receivable B) Debiting Accounts Receivable, crediting Cash C) Debiting Cash, crediting Sales Revenue D) Debiting Sales Revenue, crediting Cash Answer: B Explanation: The cash receipt is reversed and the receivable is reinstated.
B) $3,000 per year C) $4,000 per year D) $6,000 per year Answer: C Explanation: $24,000 ÷ 6 = $4,000 per year. Question 35. When closing temporary accounts, which of the following is correct? A) Debit Revenue, Credit Income Summary B) Debit Income Summary, Credit Revenue C) Debit Expenses, Credit Retained Earnings D) Debit Owner’s Capital, Credit Expenses Answer: B Explanation: Revenues are closed by debiting Revenue (or crediting Income Summary) and crediting Income Summary (or debiting Income Summary). The typical closing entry is Debit Revenue, Credit Income Summary. Question 36. The post‑closing trial balance should contain: A) All permanent and temporary accounts with zero balances B) Only permanent accounts with their ending balances C) Only temporary accounts with their ending balances D) No accounts – it is a blank report
Answer: B Explanation: After closing, only balance‑sheet (permanent) accounts appear with their final balances. Question 37. Which financial statement reports a company’s financial position at a specific point in time? A) Income Statement B) Statement of Cash Flows C) Balance Sheet D) Statement of Changes in Equity Answer: C Explanation: The Balance Sheet presents assets, liabilities, and equity as of a particular date. Question 38. Gross profit on the income statement is calculated as: A) Revenue – Operating Expenses B) Revenue – Cost of Goods Sold C) Net Income + Taxes D) Net Sales – Total Expenses Answer: B Explanation: Gross profit = Sales revenue minus COGS; it shows profit before operating expenses.
B) Variance analysis report C) Tax return D) Cash flow forecast Answer: B Explanation: Variance analysis highlights differences between budgeted and actual figures. Question 42. Which internal control helps prevent unauthorized disbursements? A) Single signature on checks B) Open‑ended invoice numbers C) Dual signatures for checks above a set amount D) Unlimited access to the cash register Answer: C Explanation: Requiring two signatures adds a check on large disbursements. Question 43. A red flag indicating possible payroll fraud is: A) Employee turnover rate below 5% B) Consistently accurate time‑cards C) “Ghost” employees on the payroll list D) Regular external audits
Answer: C Explanation: “Ghost” employees (non‑existent workers) are a common payroll fraud indicator. Question 44. The Certified Bookkeeper Code of Ethics requires confidentiality of: A) Only public financial statements B) All client information unless legally required to disclose C) Only tax return data D) Only payroll records Answer: B Explanation: Bookkeepers must keep all client information confidential unless a legal obligation exists. Question 45. When a company purchases inventory on credit, the journal entry includes a debit to: A) Accounts Payable B) Inventory C) Cash D) Cost of Goods Sold Answer: B Explanation: Inventory (an asset) is increased (debit) while a liability (Accounts Payable) is credited.
