Practice: Foundational Accounting and Terminology

A bookkeeper records office supplies bought on credit. Which account increases?

• Owner equity account

• Accounts payable account

• Cash on hand account

• Accounts receivable account

Answer explanation

Buying on credit creates an obligation to pay later, which increases accounts payable. Accounts receivable tracks money owed to the business, the opposite situation.

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Blooms Level: Apply

Which item would appear on the asset side of a balance sheet?

• Outstanding bank loan

• Office equipment owned

• Wages payable to staff

• Unpaid utility bill

Answer explanation

Office equipment has monetary value and is owned by the business, making it an asset. The other choices represent amounts the business owes.

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Blooms Level: Understand

In double-entry bookkeeping, a debit entry is recorded on which side?

• Bottom of the ledger

• Right side of account

• Top of the journal

• Left side of account

Answer explanation

Debits are always entered on the left side of an account. Credits go on the right side.

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Blooms Level: Remember

A company receives a customer payment for a prior credit sale. Which account is credited?

• Cash account

• Sales revenue account

• Accounts payable account

• Accounts receivable account

Answer explanation

The receivable decreases because the customer paid, so it is credited. Cash would be debited in this same entry.

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Blooms Level: Apply

Which of these best describes a liability?

• An obligation the business must pay

• Retained earnings kept by the owner

• Cash currently held in the register

• Inventory goods listed for resale

Answer explanation

Liabilities are obligations the business must pay in the future. Cash and inventory are assets, not debts owed by the business.

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Blooms Level: Understand

Where would a bookkeeper first record a daily business transaction?

• General journal

• General ledger

• Trial balance

• Balance sheet

Answer explanation

Transactions are first entered in the journal in date order, then posted to the ledger. The ledger organizes accounts but is not the first recording point.

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Blooms Level: Remember

In accounting software, which feature totals customer balances still unpaid?

• Sales tax summary report

• Payroll register listing

• Aged receivables report

• Vendor payment schedule

Answer explanation

Aged receivables show unpaid customer balances grouped by how long they are overdue. Vendor payment schedules track money owed to suppliers instead.

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Blooms Level: Apply

Why must total debits always equal total credits in bookkeeping?

• To match the bank statement

• To keep the accounting equation balanced

• To round all amounts to dollars

• To reduce the business tax burden

Answer explanation

Equal debits and credits keep the accounting equation balanced. Bank reconciliation is a separate process unrelated to balancing journal entries.

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Blooms Level: Understand

A clerk enters a $500 cash sale into accounting software. What is debited?

• Accounts receivable account

• Cash account

• Sales revenue account

• Cost of goods account

Answer explanation

Cash increases with a debit, while sales revenue increases with a credit. Accounts receivable applies only when the sale is made on account.

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Blooms Level: Apply

What is the main purpose of posting in bookkeeping?

• Mailing invoices to clients

• Printing financial statements

• Moving journal entries to ledger accounts

• Filing source receipts in folders

Answer explanation

Posting transfers journal entries into the appropriate ledger accounts. The other choices describe unrelated office or reporting tasks.

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Blooms Level: Understand