# Accounting Knowledge question bank Questions with answers and explanations, from the Questiva Learning skills tests. Version 2, authored 2026-08-23. Take it interactively: https://www.questivalearning.com/qbcu-certification-prep#skills ## The accounting equation, account types & normal balances ### Q1. Under accrual accounting, a payment for work you haven't done yet is recorded as: - a) Income, since the money is in the bank. - b) Accounts Receivable. - **✓ c) Unearned Revenue, a liability.** - d) Owner's Equity. > You still owe the customer the work, so the payment is a liability. It moves to income as you earn it. ### Q2. Money a sole proprietor takes for personal bills is recorded as: - **✓ a) Debit Owner's Draws, credit Checking.** - b) Debit Salaries Expense, credit Checking. - c) Debit Checking, credit Owner's Draws. - d) An expense, if it pays a bill like rent. > Money taken for personal use is a draw. It lowers equity and never reaches the Profit and Loss. ### Q3. When you record a loan payment, which part is an expense? - a) None of it. The whole payment comes off the loan balance. - **✓ b) The interest.** - c) The whole payment. - d) The principal. > The principal pays back what you borrowed, so it lowers the loan balance. Only the interest is a cost of borrowing, so only the interest goes on the Profit and Loss. ### Q4. Which account normally has a credit balance? - a) Accounts Receivable - b) Prepaid Insurance - c) Cost of Goods Sold - **✓ d) Accumulated Depreciation** > Accumulated Depreciation is a contra asset, so it carries a credit balance that reduces the cost of the fixed assets. The other three normally have debit balances. ### Q5. A bakery's flour and its cleaning supplies are categorized as: - a) Cost of Goods Sold. - **✓ b) Flour to Cost of Goods Sold, cleaning supplies to operating expenses.** - c) Operating expenses. - d) Flour to operating expenses, and cleaning supplies to Cost of Goods Sold. > Cost of Goods Sold is what goes into the product you sell, like the flour in a cake. Cleaning supplies keep the kitchen running, so they're an operating expense. ### Q6. Sales tax you collect from customers is recorded as: - a) Part of sales income. - b) Sales Tax Expense. - c) Income now, and an expense when you pay the state. - **✓ d) Sales Tax Payable, a liability.** > The tax belongs to the state. You only hold it until you pay it over, so it's a liability. ### Q7. Which is true about supplies bought on the business credit card? - a) Nothing is recorded until you pay the card. - **✓ b) The expense is recorded now, and the card balance goes up.** - c) Checking goes down on the day you buy them. - d) They're an asset until the card is paid, and then an expense. > The charge records the expense and adds to what you owe on the card, which is a liability. Cash moves only when you pay the card. ### Q8. Which leaves total assets the same? - **✓ a) Paying cash for equipment.** - b) Paying a bill already entered. - c) Buying equipment on account. - d) A month's depreciation. > Checking goes down and Equipment goes up by the same amount, so total assets don't change. ### Q9. The owner paid a business expense personally and won't be repaid. It's recorded as: - **✓ a) An expense and an owner contribution.** - b) Nothing. No business money was spent. - c) An expense paid from Checking. - d) An expense and a loan from the owner. > The business still has the expense. The owner's money went in for good, so it counts as a contribution to equity. ## Transactions, journal entries & the accounting cycle ### Q1. Under accrual accounting, an invoice for finished work is recorded as: - a) Debit Checking, credit Service Income. - b) Debit Service Income, credit Accounts Receivable. - c) Nothing until the customer pays. - **✓ d) Debit Accounts Receivable, credit Service Income.** > Under accrual, income counts when the work is done. The customer owes you, so the amount sits in Accounts Receivable until they pay. ### Q2. Paying a bill you've already entered is recorded as: - a) Debit the expense, credit Checking. - **✓ b) Debit Accounts Payable, credit Checking.** - c) Debit Checking, credit Accounts Payable. - d) Debit the expense, credit Accounts Payable. > The expense was recorded with the bill. Paying it clears Accounts Payable and lowers Checking. ### Q3. A one-year policy starting in September was paid upfront to Prepaid Insurance. With no adjustments since, the December 31 adjustment: - **✓ a) Expenses the months already used.** - b) Expenses the whole premium. - c) Debits Prepaid Insurance and credits Insurance Expense. - d) Expenses the months still to come. > The months of coverage used up by December 31 move to Insurance Expense. The rest stays prepaid for next year. ### Q4. A trial balance that balances can still hide: - a) An entry with only the debit side posted. - **✓ b) Rent posted to Advertising Expense.** - c) A credit entered for less than its debit. - d) A debit posted as a credit. > A trial balance only checks that debits equal credits. An amount posted to the wrong account still balances, so you find it in the account detail. ### Q5. At year end, which accounts are closed so they start the new year at zero? - a) Cash, Accounts Receivable and Inventory. - b) Every balance sheet account. - **✓ c) Income, expense and draw accounts.** - d) Only the expense accounts. > Income, expenses and draws measure one year at a time, so their net is closed into equity (Retained Earnings or Owner's Capital). Asset, liability and capital accounts carry their balances forward. ### Q6. With perpetual inventory, a sale is recorded as: - a) Sales now. Cost of Goods Sold is figured from the year-end inventory count. - b) Sales for the profit, and Inventory for the item's cost. - **✓ c) Sales, and the item's cost moved from Inventory to Cost of Goods Sold.** - d) A credit to Inventory for the full price. > Perpetual inventory updates your stock with every sale. The price goes to Sales, and the item's cost moves from Inventory to Cost of Goods Sold at the same time. ### Q7. In bookkeeping software, which of these usually needs a manual journal entry? - a) Billing a customer. - b) Entering the phone bill. - c) Applying a customer's check to two invoices. - **✓ d) Monthly depreciation.** > Depreciation has no form of its own, so it goes in as a journal entry. Invoices, bills and payments each have a form. ## Receivables, payables & cash application ### Q1. A negative customer balance on the A/R Aging Summary means the customer: - a) Owes money that isn't due yet. - b) Had an invoice written off as bad debt. - c) Had an unpaid invoice deleted. - **✓ d) Has a credit on their account.** > They have paid or been credited more than they were billed. Look for an overpayment, or a payment or credit memo that was never applied. ### Q2. If you record a customer's payment as a new sale instead of applying it to their invoice: - a) Cash is overstated. - b) It doesn't matter, since cash and income go up either way. - c) Accounts Receivable is understated. - **✓ d) The income is counted twice in accrual-based reports.** > The invoice already recorded the income, so the sale counts it again. The invoice also stays open, so the customer still looks like they owe. ### Q3. A customer returns goods before paying the invoice. The credit memo is recorded as: - **✓ a) Debit Sales Returns, credit Accounts Receivable.** - b) Debit Accounts Receivable, credit Sales Returns. - c) Debit Cash, credit Accounts Receivable. - d) No entry until they pay. > The credit memo takes back the income on the returned goods and lowers what the customer owes. No money changed hands, so Cash isn't involved. ### Q4. A supplier credits you for damaged goods on a bill you haven't paid yet. The vendor credit: - a) Puts the credit back in your bank account as cash. - **✓ b) Lowers what you owe and the cost of the goods.** - c) Adds to what you owe. - d) Increases your inventory and what you owe. > It debits Accounts Payable and credits the inventory or expense account the bill used. No money changes hands. ### Q5. Entering a vendor statement as a bill, when its invoices are already in your books: - a) Keeps the vendor's balance current. - **✓ b) Overstates expenses and Accounts Payable.** - c) Understates Accounts Payable. - d) Records a payment on the account. > A statement only summarizes bills you already have. Entering it as a bill records those purchases a second time. ### Q6. When a customer's check bounces, you should: - **✓ a) Put it back in Accounts Receivable and reduce Cash.** - b) Write it off as bad debt. - c) Delete the original payment and the deposit it was on. - d) Record it as a sales return. > The bank took the money back, so the customer owes it again. It isn't a bad debt unless they never pay. ### Q7. A refund check for a customer's overpayment: - a) Is a business expense. - b) Reduces sales. - **✓ c) Clears the customer's credit balance.** - d) Should be entered as a credit memo instead. > The overpayment sits in Accounts Receivable as a credit. The refund check debits A/R and credits Cash, which brings the customer back to zero. ### Q8. Under accrual accounting, a service you buy is an expense in the period when: - **✓ a) You receive the service.** - b) The bill is dated. - c) You pay the bill. - d) You choose, as long as you're consistent. > Accrual records an expense when you receive the service. A repair done in December and billed in January is a December expense. ## Cash, bank reconciliation & internal controls ### Q1. When you reconcile, which of these needs an entry in your books? - a) Deposits in transit. - b) Checks that haven't cleared yet. - **✓ c) Bank service charges.** - d) An error the bank made. > The bank already took the service charge, but your books won't show it until you enter it. The other three are already right in your books. ### Q2. A check from a closed period will never be cashed. You should: - a) Delete it. - **✓ b) Reverse it in the current period.** - c) Leave it outstanding. - d) Void it back in the month it was written. > Reversing it now clears it without changing the closed period. An uncashed check may also have to be reported to the state as unclaimed property. ### Q3. The same person writes the checks and reconciles the bank account. The owner should start by: - **✓ a) Reviewing the bank statements before the bookkeeper does.** - b) Writing a job description for the bookkeeper. - c) Paying vendors by ACH instead of by check. - d) Having the bookkeeper reconcile twice a month instead of once. > Right now nobody else sees what clears the bank. Owner review of the statements, and vacations with someone else covering, are the simplest checks. ### Q4. Customer checks deposited together show as one deposit at the bank. To record them: - **✓ a) Receive each payment, then group them on one deposit.** - b) Receive each payment straight into Checking. - c) Enter one deposit and reduce Accounts Receivable with a journal entry. - d) Wait for the bank statement. > Each payment closes its invoice and waits in Undeposited Funds. One deposit then matches the single line on the bank statement. ### Q5. What do you do with a bank feed transaction you already entered as a bill payment? - a) Add it, then delete your bill payment. - **✓ b) Match it to the bill payment.** - c) Add it and let the reconciliation sort out the duplicate. - d) Exclude it. > Matching links the bank's line to the payment already in your books, so it's recorded once and marked cleared. ### Q6. A reconciliation's beginning balance can stop matching last month's ending balance when: - a) Someone adds a new transaction dated last month. - b) Last month's outstanding checks clear. - **✓ c) A reconciled transaction is deleted or changed.** - d) The bank corrects an error on its side. > The beginning balance is the total of everything already marked reconciled, so it only moves when one of those transactions changes. A new entry dated last month just shows up in this month's list. ### Q7. When a bank reconciliation won't balance, it's best to: - **✓ a) Find the difference before you finish.** - b) Finish it if the difference is only a few cents. - c) Post an adjustment now and reverse it next month. - d) Change the beginning balance to match the statement. > Forcing the reconciliation posts the difference to a discrepancy account, and whatever caused it stays in your books. ### Q8. When a card processor keeps its fee from a customer payment, record: - a) Only the amount deposited. - b) A surcharge on the invoice. - **✓ c) The full payment and a fee expense.** - d) A discount on the invoice. > The customer paid the full amount. Record the full payment and the fee as an expense, and the deposit nets to what the bank received. ### Q9. A vendor emails you new bank account details. To confirm them: - a) Reply to their email. - b) Check that the email address matches their earlier ones. - **✓ c) Call the number you already have for them.** - d) Accept it if it came from your usual contact. > These requests often come from a hacked or look-alike email account. Confirm by phone, using a number from your own records. ### Q10. Card purchases are entered as expenses when they're made. The monthly card payment from checking is: - a) Another expense, dated on the statement. - **✓ b) A transfer from checking to the card.** - c) The point when the charges become deductible. - d) A reduction in checking only. > The purchases were expensed when they were charged. Paying the card lowers checking and the card balance, so recording it as an expense counts the spending twice. ## Financial statements & analysis ### Q1. To see what the business owns and what it owes as of today, you should: - a) Run a Profit and Loss report. - b) Look at the Statement of Cash Flows. - **✓ c) Run a Balance Sheet.** - d) Add up your open invoices and unpaid bills. > The Balance Sheet lists assets, liabilities and equity as of one date. The Profit and Loss covers a stretch of time and shows income and expenses. ### Q2. A bank loan to the business, deposited into its checking account, is recorded as: - a) Income. - b) An owner's investment. - c) An expense, once you start paying it back. - **✓ d) A liability.** > Borrowed money isn't earned, so the deposit adds to cash and to a loan liability. Later, only the interest you pay is an expense. ### Q3. The business made a profit this year, but its bank balance went down. What could be causing it? - a) A large depreciation entry. - b) More unpaid vendor bills than last year. - **✓ c) Customers are slower to pay their invoices.** - d) Employees have earned wages you haven't paid yet. > A sale on an invoice counts as income right away, but the cash comes in only when the customer pays. If unpaid invoices grow by more than the profit, cash goes down. ### Q4. A request for revenue "as of June 30" is missing: - a) Nothing. The Balance Sheet for that date shows it. - b) Cash or accrual, since revenue only exists under accrual. - **✓ c) A start date.** - d) The bank account it was deposited into. > Revenue is reported for a period, and balances as of one date. Revenue through June 30 could mean June alone or the year to date. ### Q5. Until they sell, products you buy to resell are recorded in: - a) Cost of Goods Sold. - b) An expense account, such as Supplies. - c) A Fixed Asset account. - **✓ d) Inventory, an asset.** > Inventory stays an asset until it sells. Then its cost moves to Cost of Goods Sold, so the purchase alone doesn't touch the Profit and Loss. ### Q6. When a building's market value rises, the books should: - a) Write it up to market value and raise equity. - b) Wait for a licensed appraiser to change it. - c) Record the rise as income. - **✓ d) Keep it at cost, less depreciation.** > Assets stay on the books at what you paid, less depreciation. A gain shows up only when the asset is sold. ## Payroll, sales tax, 1099s, fixed assets & period close ### Q1. In a paycheck entry, the taxes withheld from the employee go to: - a) Payroll Tax Expense. - **✓ b) Payroll Liabilities.** - c) Checking, along with the net pay. - d) Nowhere. Only the net pay is recorded. > Withheld taxes are the employee's money that you owe the government. They sit in Payroll Liabilities until you pay them, and Wages Expense is the full gross pay. ### Q2. For your financial statements, straight-line depreciation spreads evenly over an asset's useful life: - **✓ a) Its cost, less what you expect to sell it for.** - b) Its full purchase price, whatever it sells for later. - c) The loan payments on it. - d) Its drop in market value. > You depreciate the cost less salvage value (what you expect to sell it for), split evenly over the years you use it. ### Q3. Before you hand over last month's financial statements, you should: - a) Pay every open bill so Accounts Payable is zero. - b) Delete bank feed transactions that aren't categorized yet. - c) Run this month's payroll. - **✓ d) Reconcile the bank and credit card accounts.** > Reconciling proves every bank and card transaction is in the books once. Until then, you can't trust the cash balance. ### Q4. Your payroll journal records wages and what's owed. The payroll service's withdrawal goes to: - a) Payroll Expense. - **✓ b) Payroll Liabilities.** - c) Wages Expense and Payroll Tax Expense. - d) Nowhere. The journal already covers it. > The journal already records the expense and what's owed, so the withdrawal pays down Payroll Liabilities. Coding it to expense counts payroll twice. ### Q5. Can taxes withheld from paychecks pay the rent when cash is short? - a) Yes, as long as they're deposited before the quarterly return is due. - b) Yes, if it's recorded as a loan from the owner. - c) Small amounts, yes. - **✓ d) No. They have to be deposited on time.** > Withheld taxes are the employees' money, held in trust until they're paid over. Late deposits bring penalties, and the people responsible can be held personally liable. ### Q6. When you refund a sale and its sales tax, you reduce: - **✓ a) Sales and Sales Tax Payable.** - b) Sales, by the full refund. - c) Sales, and record the tax as a refund expense. - d) Nothing. The whole refund is an expense. > The tax was collected for the state. Once you refund it you no longer owe it, so Sales Tax Payable goes down along with Sales. ### Q7. The bank account reconciles, but Undeposited Funds still holds payments that were deposited. Why? - **✓ a) The deposits were entered as new income.** - b) That account always carries a balance. - c) The deposits are still in transit. - d) The payments weren't applied to their invoices. > A deposit entered straight to income skips the payments waiting in Undeposited Funds. They stay there, and the income is counted twice.