22 Bookkeeping Basics & Double-Entry Practice Questions & Answers

1. 1. A print shop buys a $9,000 press and agrees to pay the supplier in 60 days. What is the immediate effect on the accounting equation?

   • A.Total assets are unchanged; liabilities increase $9,000 and owner's equity decreases $9,000.
   • B.Total assets increase $9,000 and total liabilities increase $9,000; owner's equity is unchanged.✓ Answer
   • C.Total assets increase $9,000 and owner's equity increases $9,000; liabilities are unchanged.
   • D.Total assets decrease $9,000 and total liabilities increase $9,000.

   The entry debits Equipment and credits Accounts Payable for the same $9,000, so both sides of Assets = Liabilities + Owner's Equity rise by an identical amount and the equation stays in balance. Buying an asset on credit is a financing event, not an earnings event, so no revenue, expense, or equity account is touched.

   Source: US GAAP double-entry accounting equation: Assets = Liabilities + Owner's EquityReport a problem with this question

2. 2. A company collects $2,500 from a customer in payment of an invoice recorded earlier as a sale on account. What happens to the accounting equation?

   • A.Total assets are unchanged, but owner's equity increases $2,500 because the amount has now been realized in cash.
   • B.Total assets are unchanged; only the composition of the assets changes, and liabilities and equity are unaffected.✓ Answer
   • C.Total assets increase $2,500 and revenue increases $2,500.
   • D.Total assets decrease $2,500 and owner's equity decreases $2,500.

   The entry debits Cash and credits Accounts Receivable, so one asset rises and another falls by the same $2,500 while liabilities and equity are untouched. Revenue was already recognized on the date of the credit sale, so recognizing it again at collection would count the same earnings twice.

   Source: Double-entry recording of collections on account; revenue recognized at the sale date under accrual accountingReport a problem with this question

3. 3. The owner of a sole proprietorship withdraws $3,000 of business cash for personal use. Which statement correctly describes the effect?

   • A.Assets decrease $3,000 and liabilities decrease $3,000.
   • B.Assets decrease $3,000 and owner's equity decreases $3,000; liabilities are unchanged.✓ Answer
   • C.There is no effect on the books, because the owner and the business are the same person.
   • D.Assets decrease $3,000 and Wages Expense increases $3,000.

   The entry debits the Withdrawals (Drawing) account and credits Cash, so assets and equity both fall by $3,000 and the equation stays in balance. Withdrawals is an equity account with a debit normal balance, not an expense, so it never appears on the income statement; the economic entity assumption requires the owner's personal use of business assets to be tracked separately from operations.

   Source: Economic entity assumption; owner's withdrawals (drawing) as a reduction of equity, not an expenseReport a problem with this question

4. 4. What is the normal balance of Accumulated Depreciation—Equipment, and why?

   • A.Debit, because depreciation is an expense of the period.
   • B.Debit, because the account is reported in the asset section of the balance sheet.
   • C.It has no normal balance, because the account is closed to Capital at the end of each period.
   • D.Credit, because it is a contra-asset account that is deducted from the asset it relates to.✓ Answer

   A contra account always carries the balance opposite to the account it offsets, so Accumulated Depreciation sits in the asset section yet has a credit normal balance and is subtracted from the asset's cost to show book value. It is a permanent account that is never closed, unlike Depreciation Expense, which is a temporary account closed each period.

   Source: US GAAP balance sheet presentation of accumulated depreciation as a contra-asset deducted from property and equipmentReport a problem with this question

5. 5. Which of the following accounts normally carries a debit balance?

   • A.Interest Payable
   • B.Sales Returns and Allowances✓ Answer
   • C.Unearned Fees
   • D.Allowance for Doubtful Accounts

   Sales Returns and Allowances is a contra-revenue account, so it carries the side opposite to revenue's credit balance and is deducted from gross sales to arrive at net sales. The other three are two liabilities and a contra-asset, all of which normally carry credit balances.

   Source: Normal balances of contra-revenue accounts (Sales Returns and Allowances)Report a problem with this question

6. 6. How do the general journal and the general ledger differ?

   • A.The ledger is the book of original entry, and the journal simply summarizes it by account.
   • B.The journal is the book of original entry, listing each complete transaction in date order, while the ledger regroups those same debits and credits by account and carries each account's running balance.✓ Answer
   • C.The journal shows each account's balance, while the ledger shows only the debit side of each transaction.
   • D.The journal records only cash transactions, while the ledger records only credit transactions.

   Transactions enter the records chronologically in the journal, where both sides of the entry appear together with an explanation, and are then transferred to the ledger, which is organized by account so that a balance can be read for Cash, Accounts Receivable, and every other account. The trial balance is built from ledger balances, not from the journal.

   Source: Bookkeeping cycle: the journal as the book of original entry and the ledger as the book of accountsReport a problem with this question

7. 7. In the bookkeeping cycle, posting is the step that does what?

   • A.Proves that total debits equal total credits across all ledger accounts.
   • B.Carries the adjusted account balances into the financial statements.
   • C.Transfers the debit and credit amounts already journalized into the individual ledger accounts.✓ Answer
   • D.Analyzes the source document to decide which accounts a transaction affects.

   Posting simply moves amounts already journalized into the affected ledger accounts so each account accumulates a balance; the posting reference column is filled in only after the transfer is made, which is what lets a bookkeeper spot an entry that was only half posted. Proving debit-credit equality is the job of the trial balance, a later step.

   Source: Bookkeeping cycle: journalizing, posting, and the trial balanceReport a problem with this question

8. 8. A merchandiser keeps a sales journal, a purchases journal, a cash receipts journal, a cash payments journal, and a general journal. Where is a $600 sale of merchandise on account recorded?

   • A.The sales journal✓ Answer
   • B.The general journal
   • C.The purchases journal
   • D.The cash receipts journal

   Each special journal is reserved for one high-volume transaction type, and the sales journal is used exclusively for sales on account; a cash sale would go in the cash receipts journal and a credit purchase in the purchases journal. The general journal is reserved for transactions that fit no special journal, such as adjusting and closing entries.

   Source: Special journals: sales journal reserved for sales on accountReport a problem with this question

9. 9. At month end the Accounts Receivable account in the general ledger shows $48,200, while the customer accounts in the accounts receivable subsidiary ledger add up to $47,700. What does this tell the bookkeeper?

   • A.There is an error: the control account balance must equal the total of the customer subsidiary accounts, so the postings have to be traced and corrected.✓ Answer
   • B.The control account should simply be written down to $47,700 without further investigation.
   • C.The trial balance will be out of balance by $500.
   • D.Nothing is wrong; the control account normally exceeds the subsidiary ledger by the amount of cash sales.

   Accounts Receivable in the general ledger is a control account whose balance must equal the sum of the individual customer accounts it summarizes, and a schedule of accounts receivable is prepared to prove that agreement. Because subsidiary accounts are not part of the trial balance, this kind of error leaves the trial balance perfectly in balance, which is exactly why the separate proof is needed.

   Source: Control accounts and subsidiary ledgers; schedule of accounts receivableReport a problem with this question

10. 10. An unadjusted trial balance's debit and credit totals agree exactly. Which of the following errors could still be present in the records?

    • A.A payment for advertising was posted in full as a debit to Utilities Expense.✓ Answer
    • B.A $400 debit was posted twice while its credit was posted only once.
    • C.The credit side of a $250 entry was never posted.
    • D.A $700 debit to Supplies was posted as $70.

    A trial balance proves only one thing: that total debits equal total credits. Posting the correct amount to the wrong account of the same type keeps both totals identical, so the error is invisible on the trial balance; the other three choices each destroy the equality and would be revealed. Omitting an entire entry, using a wrong accounting principle, and compensating errors are likewise hidden by a balanced trial balance.

    Source: Purpose and limitations of the trial balanceReport a problem with this question

11. 11. Which of the following accounts appears on the balance sheet rather than on the income statement?

    • A.Sales Discounts
    • B.Service Revenue
    • C.Unearned Service Revenue✓ Answer
    • D.Depreciation Expense

    Unearned Service Revenue is a liability: the customer's cash has been received but the obligation to perform has not been satisfied, so it is a real (permanent) account whose balance carries forward and is never closed. The other three are nominal (temporary) accounts that are closed to Income Summary at the end of each period and start the new period at zero.

    Source: Real (permanent) versus nominal (temporary) accounts; unearned revenue as a liability (FASB ASC 606 contract liability)Report a problem with this question

12. 12. During the year a sole proprietorship recorded $180,000 of revenue and $145,000 of expenses, and the owner withdrew $10,000. There were no additional owner investments. How did owner's capital change for the year?

    • A.It increased $25,000.✓ Answer
    • B.It was unchanged, because revenue and expenses close to Income Summary rather than to capital.
    • C.It increased $45,000.
    • D.It increased $35,000.

    Net income of $35,000 ($180,000 minus $145,000) increases capital and the $10,000 of withdrawals decreases it, for a net increase of $25,000. Income Summary is only a temporary clearing account: after revenues and expenses are closed into it, its balance is itself closed to capital, and withdrawals are closed directly to capital rather than through Income Summary.

    Source: Closing process and statement of owner's equity: net income increases capital, withdrawals reduce itReport a problem with this question

13. 13. A company signs a $60,000 note payable repayable in monthly installments over 30 months, of which $24,000 of principal comes due within the next 12 months. On the balance sheet at year end, how is the note classified?

    • A.The entire $60,000 as a current liability, because the note is a single obligation.
    • B.The entire $60,000 as a long-term liability, because the note's total term exceeds one year.
    • C.$24,000 as a current liability and $36,000 as a long-term liability.✓ Answer
    • D.The classification depends on the lender's fiscal year rather than the borrower's.

    An obligation is current if it will be settled within one year or within the entity's operating cycle, whichever is longer, so the installments due in that window are current and the remainder is long-term. A single note is therefore split between the two sections, which is why the current portion of long-term debt is a normal balance sheet line.

    Source: FASB ASC 210, current versus noncurrent classification (one year or the operating cycle, whichever is longer)Report a problem with this question

14. 14. On November 1 a landlord whose year ends December 31 collects $1,800 covering rent for November, December, and January. How much rent revenue does the year ended December 31 report under the cash basis and under the accrual basis, respectively?

    • A.$1,800 under the cash basis and $1,800 under the accrual basis.
    • B.$1,800 under the cash basis and $1,200 under the accrual basis.✓ Answer
    • C.$600 under the cash basis and $1,200 under the accrual basis.
    • D.$1,200 under the cash basis and $1,800 under the accrual basis.

    Under the cash basis revenue is recorded when the cash comes in, so the entire $1,800 falls in the year of receipt. Under the accrual basis revenue is recorded as it is earned, which is $600 a month for November and December, or $1,200, while the remaining $600 sits in Unearned Rent, a liability, until January.

    Source: Cash basis versus accrual basis revenue recognition; unearned revenueReport a problem with this question

15. 15. A consultant finishes $4,000 of work in December, mails the invoice on January 5, and is paid on February 10. For external financial reporting, in which period is the $4,000 of revenue recognized, and which basis governs?

    • A.In February, when the cash is received, because revenue must be collected in cash before it can be recorded.
    • B.In January, when the invoice is issued; both the cash basis and the accrual basis conform to US GAAP.
    • C.In December, under the accrual basis, which is the only basis that conforms to US GAAP.✓ Answer
    • D.Spread evenly over December, January and February, because the collection cycle spans three months.

    Accrual accounting recognizes revenue when the performance obligation is satisfied, not when cash moves, so the December work produces a December entry debiting Accounts Receivable and crediting Service Revenue; issuing the invoice and receiving payment are later steps that do not create revenue. The cash basis is permitted for some tax and small-entity purposes but is not GAAP.

    Source: FASB ASC 606, revenue recognized when the performance obligation is satisfied; accrual basis required by US GAAPReport a problem with this question

16. 16. Which sequence correctly states the first four steps of the bookkeeping cycle?

    • A.Journalize the entry, analyze the source document, prepare the trial balance, post to the general ledger.
    • B.Post to the general ledger, journalize the entry, prepare the trial balance, analyze the source document.
    • C.Analyze the source document, post to the general ledger, journalize the entry, prepare the trial balance.
    • D.Analyze the source document, journalize the entry, post to the general ledger, prepare the unadjusted trial balance.✓ Answer

    Every entry begins with evidence — an invoice, check stub, or receipt — that is analyzed to identify the accounts and amounts, then recorded chronologically in the journal, the book of original entry, and only afterward transferred to the ledger accounts. The unadjusted trial balance is then taken from the ledger balances to prove debit-credit equality before adjusting entries are made.

    Source: Bookkeeping cycle sequence: source document, journal, ledger, unadjusted trial balanceReport a problem with this question

17. 17. A repair business performs $3,200 of services for a customer and bills the customer on terms of n/30. What is the entry on the date the service is performed?

    • A.Debit Cash $3,200; credit Service Revenue $3,200.
    • B.Debit Accounts Receivable $3,200; credit Unearned Service Revenue $3,200.
    • C.Debit Service Revenue $3,200; credit Accounts Receivable $3,200.
    • D.Debit Accounts Receivable $3,200; credit Service Revenue $3,200.✓ Answer

    The service has been performed, so revenue is earned and is credited, and the enforceable right to collect is an asset, so Accounts Receivable is debited; no cash has moved yet, which is why Cash is not in the entry. Unearned Service Revenue would be used only if the customer had paid before the work was done.

    Source: Accrual revenue recognition for services performed on accountReport a problem with this question

18. 18. Three weeks later the same repair business receives the customer's check for the full $3,200 owed on that invoice. What is the entry on the date of collection?

    • A.Debit Cash $3,200; credit Service Revenue $3,200.
    • B.Debit Cash $3,200; credit Accounts Receivable $3,200.✓ Answer
    • C.Debit Accounts Receivable $3,200; credit Cash $3,200.
    • D.Debit Cash $3,200; credit Unearned Service Revenue $3,200.

    Collection merely converts one asset into another: Cash is debited because it increases and Accounts Receivable is credited because the customer no longer owes anything. Revenue was already recorded when the service was performed, so crediting revenue again would overstate income by $3,200.

    Source: Double-entry recording of cash collected on accountReport a problem with this question

19. 19. A bakery acquires an oven priced at $18,000 by paying $3,000 in cash and signing a promissory note for the $15,000 balance. What is the entry?

    • A.Debit Equipment $18,000; credit Cash $3,000 and credit Notes Payable $15,000.✓ Answer
    • B.Debit Equipment $18,000; credit Accounts Payable $18,000.
    • C.Debit Equipment $3,000; credit Cash $3,000, and record the note only when it is paid.
    • D.Debit Equipment Expense $18,000; credit Cash $3,000 and credit Notes Payable $15,000.

    The asset is recorded at its full historical acquisition cost of $18,000 regardless of how it is financed, and the credits split between the cash paid and the obligation created; this compound entry has three lines but still balances at $18,000 on each side. A signed promissory note is a Note Payable rather than an open Account Payable, and equipment that will serve several periods is capitalized, not expensed.

    Source: Historical cost principle and compound journal entries; notes payable versus accounts payableReport a problem with this question

20. 20. The owner of a sole proprietorship deposits $25,000 of her personal savings into the business bank account as an investment in the business. What is the entry on the books of the business?

    • A.Debit Cash $25,000; credit Service Revenue $25,000.
    • B.Debit Cash $25,000; credit Owner's Capital $25,000.✓ Answer
    • C.Debit Owner's Capital $25,000; credit Cash $25,000.
    • D.Debit Cash $25,000; credit Notes Payable $25,000.

    An owner investment increases an asset and increases equity, so Cash is debited and the Capital account, which has a credit normal balance, is credited. The amount is not revenue because it was not earned by serving customers, and it is not a liability because the business has no fixed obligation to repay it.

    Source: Economic entity assumption; owner investments credited to the capital accountReport a problem with this question

21. 21. A landscaping company receives a $5,000 deposit from a customer on January 20 for a job that will not begin until February. What is the entry on January 20?

    • A.Debit Cash $5,000; credit Service Revenue $5,000.
    • B.Debit Unearned Service Revenue $5,000; credit Cash $5,000.
    • C.Debit Accounts Receivable $5,000; credit Service Revenue $5,000.
    • D.Debit Cash $5,000; credit Unearned Service Revenue $5,000.✓ Answer

    Cash received before the work is performed creates an obligation either to do the job or to refund the money, which is a liability, so Cash is debited and Unearned Service Revenue is credited. Revenue is recognized later, as the work is performed, by debiting Unearned Service Revenue and crediting Service Revenue for the portion earned.

    Source: FASB ASC 606 contract liability (unearned revenue) for cash received before performanceReport a problem with this question

22. 22. A retailer using a periodic inventory system bought $4,000 of merchandise on account and, before paying the invoice, returned $600 of damaged goods to the supplier. What is the entry for the return?

    • A.Debit Accounts Payable $600; credit Purchase Returns and Allowances $600.✓ Answer
    • B.Debit Cash $600; credit Purchases $600.
    • C.Debit Sales Returns and Allowances $600; credit Accounts Payable $600.
    • D.Debit Purchase Returns and Allowances $600; credit Accounts Payable $600.

    Returning goods reduces the amount owed to the supplier, so Accounts Payable is debited, and the credit goes to Purchase Returns and Allowances, a contra-cost account with a credit normal balance that is deducted from gross purchases. No cash is involved because the invoice has not been paid, and Sales Returns and Allowances is the seller's account, not the buyer's.

    Source: Periodic inventory system: Purchase Returns and Allowances as a contra-cost accountReport a problem with this question

Practice questions based on the subject areas of the AIPB Certified Bookkeeper designation, US GAAP, and federal payroll practice. Tax rates, wage bases, contribution limits and withholding tables are reset annually and unemployment and wage-and-hour rules differ by state, so no such figure is used as an answer here — where a calculation needs one, the question supplies it. Confirm the rates in effect for your payroll period and your state's requirements before applying anything here to real books. AIPB and Certified Bookkeeper are marks of the American Institute of Professional Bookkeepers; this site is not affiliated with or endorsed by the AIPB. About the Certified Bookkeeper exam →