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CERTIFIED BOOKKEEPER (CB) EXAM – EXAM
PREP GUIDE | LATEST UPDATE 2026–2027
|PRACTICE QUESTIONS AND ANSWERS with
RATIONALES.
Insurance Regulation and Licensing
Insurance Basics and Loss Principles
Role of the Appraiser and Duties After Loss
Determining Value, Loss Adjustment, and Total Loss
Vehicle Inspection, Identification, and Repair Estimating
Vehicle Parts, Construction, and Damage Analysis
Auto Theft, Arson, and Fraud
, Page 2 of 78
Question 1: A consulting firm completed a $12,000 project on December 28 but
did not bill the client until January 6. Under accrual accounting, what adjusting
entry is required on December 31?
A) Debit Cash $12,000; Credit Consulting Revenue $12,000
B) Debit Accounts Receivable $12,000; Credit Consulting Revenue $12,000
C) Debit Consulting Revenue $12,000; Credit Unearned Revenue $12,000
D) No entry is required until the client is billed.
Correct Answer: B
Under accrual accounting, revenue is recognized when earned, not when billed
or collected. Because the service was completed before year-end, the firm has a
receivable and earned revenue. Option A records cash that has not been
received. Option C reverses the revenue. Option D ignores the matching
principle.
Question 2: An insurance premium of $6,000 was paid on October 1 for a 12-
month policy and recorded entirely as Prepaid Insurance. What adjusting entry
is required on December 31?
A) Debit Insurance Expense $1,500; Credit Prepaid Insurance $1,500
B) Debit Prepaid Insurance $1,500; Credit Insurance Expense $1,500
C) Debit Insurance Expense $6,000; Credit Prepaid Insurance $6,000
D) No adjusting entry is required.
Correct Answer: A
Three months of coverage (October–December) have expired: $6,000 × 3/12 =
$1,500. The adjusting entry recognizes the expense and reduces the asset.
Option B reverses the direction. Option C expenses the entire policy
prematurely. Option D ignores the expiration of coverage.
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Question 3: A company received $9,000 on November 1 for services to be
performed evenly over six months and recorded the entire amount as Unearned
Revenue. What adjusting entry is required on December 31?
A) Debit Unearned Revenue $3,000; Credit Service Revenue $3,000
B) Debit Service Revenue $3,000; Credit Unearned Revenue $3,000
C) Debit Cash $3,000; Credit Service Revenue $3,000
D) No entry is required until services are complete.
Correct Answer: A
Two months of the six-month obligation (November and December) have been
earned: $9,000 × 2/6 = $3,000. The liability is reduced, and revenue is
recognized. Option B reverses the entry. Option C incorrectly involves cash.
Option D fails to recognize earned revenue.
Question 4: An employee earned $2,400 in the last week of December but will
not be paid until January 5. What adjusting entry is required on December 31?
A) Debit Salaries Expense $2,400; Credit Salaries Payable $2,400
B) Debit Salaries Payable $2,400; Credit Salaries Expense $2,400
C) Debit Cash $2,400; Credit Salaries Expense $2,400
D) No entry is required until payday.
Correct Answer: A
The matching principle requires that the expense be recognized in the period the
work was performed, even if payment occurs later. A payable is recorded.
Option B reverses the entry. Option C records cash not yet paid. Option D
mismatches the expense to the following period.
Question 5: A company has a $50,000 note payable with a 6% annual interest
rate. Interest for December has not been recorded. What adjusting entry is
required on December 31?
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A) Debit Interest Expense $250; Credit Interest Payable $250
B) Debit Interest Payable $250; Credit Interest Expense $250
C) Debit Cash $250; Credit Interest Expense $250
D) No entry is required until the interest is paid.
Correct Answer: A
Monthly interest is $50,000 × 6% × 1/12 = $250. The expense is incurred in
December and must be accrued with a payable. Option B reverses the entry.
Option C records cash not yet paid. Option D fails to accrue the expense.
Question 6: A company purchased equipment for $30,000 on January 1. It has a
five-year useful life and no salvage value. What is the adjusting entry for
depreciation on December 31 of the first year using straight-line depreciation?
A) Debit Depreciation Expense $6,000; Credit Accumulated Depreciation
$6,000
B) Debit Accumulated Depreciation $6,000; Credit Depreciation Expense
$6,000
C) Debit Equipment $6,000; Credit Cash $6,000
D) No entry is required in the first year.
Correct Answer: A
Straight-line depreciation is $30,000 ÷ 5 = $6,000 per year. The entry records
expense and increases the contra-asset account. Option B reverses the entry.
Option C is a purchase transaction, not depreciation. Option D ignores the
allocation of cost.
Question 7: An adjusted trial balance is prepared after all adjusting entries are
posted. What is its primary purpose?
A) To prove the equality of debits and credits after adjustments and to serve as
the basis for preparing financial statements.
B) To replace the need for a general ledger.
CERTIFIED BOOKKEEPER (CB) EXAM – EXAM
PREP GUIDE | LATEST UPDATE 2026–2027
|PRACTICE QUESTIONS AND ANSWERS with
RATIONALES.
Insurance Regulation and Licensing
Insurance Basics and Loss Principles
Role of the Appraiser and Duties After Loss
Determining Value, Loss Adjustment, and Total Loss
Vehicle Inspection, Identification, and Repair Estimating
Vehicle Parts, Construction, and Damage Analysis
Auto Theft, Arson, and Fraud
, Page 2 of 78
Question 1: A consulting firm completed a $12,000 project on December 28 but
did not bill the client until January 6. Under accrual accounting, what adjusting
entry is required on December 31?
A) Debit Cash $12,000; Credit Consulting Revenue $12,000
B) Debit Accounts Receivable $12,000; Credit Consulting Revenue $12,000
C) Debit Consulting Revenue $12,000; Credit Unearned Revenue $12,000
D) No entry is required until the client is billed.
Correct Answer: B
Under accrual accounting, revenue is recognized when earned, not when billed
or collected. Because the service was completed before year-end, the firm has a
receivable and earned revenue. Option A records cash that has not been
received. Option C reverses the revenue. Option D ignores the matching
principle.
Question 2: An insurance premium of $6,000 was paid on October 1 for a 12-
month policy and recorded entirely as Prepaid Insurance. What adjusting entry
is required on December 31?
A) Debit Insurance Expense $1,500; Credit Prepaid Insurance $1,500
B) Debit Prepaid Insurance $1,500; Credit Insurance Expense $1,500
C) Debit Insurance Expense $6,000; Credit Prepaid Insurance $6,000
D) No adjusting entry is required.
Correct Answer: A
Three months of coverage (October–December) have expired: $6,000 × 3/12 =
$1,500. The adjusting entry recognizes the expense and reduces the asset.
Option B reverses the direction. Option C expenses the entire policy
prematurely. Option D ignores the expiration of coverage.
, Page 3 of 78
Question 3: A company received $9,000 on November 1 for services to be
performed evenly over six months and recorded the entire amount as Unearned
Revenue. What adjusting entry is required on December 31?
A) Debit Unearned Revenue $3,000; Credit Service Revenue $3,000
B) Debit Service Revenue $3,000; Credit Unearned Revenue $3,000
C) Debit Cash $3,000; Credit Service Revenue $3,000
D) No entry is required until services are complete.
Correct Answer: A
Two months of the six-month obligation (November and December) have been
earned: $9,000 × 2/6 = $3,000. The liability is reduced, and revenue is
recognized. Option B reverses the entry. Option C incorrectly involves cash.
Option D fails to recognize earned revenue.
Question 4: An employee earned $2,400 in the last week of December but will
not be paid until January 5. What adjusting entry is required on December 31?
A) Debit Salaries Expense $2,400; Credit Salaries Payable $2,400
B) Debit Salaries Payable $2,400; Credit Salaries Expense $2,400
C) Debit Cash $2,400; Credit Salaries Expense $2,400
D) No entry is required until payday.
Correct Answer: A
The matching principle requires that the expense be recognized in the period the
work was performed, even if payment occurs later. A payable is recorded.
Option B reverses the entry. Option C records cash not yet paid. Option D
mismatches the expense to the following period.
Question 5: A company has a $50,000 note payable with a 6% annual interest
rate. Interest for December has not been recorded. What adjusting entry is
required on December 31?
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A) Debit Interest Expense $250; Credit Interest Payable $250
B) Debit Interest Payable $250; Credit Interest Expense $250
C) Debit Cash $250; Credit Interest Expense $250
D) No entry is required until the interest is paid.
Correct Answer: A
Monthly interest is $50,000 × 6% × 1/12 = $250. The expense is incurred in
December and must be accrued with a payable. Option B reverses the entry.
Option C records cash not yet paid. Option D fails to accrue the expense.
Question 6: A company purchased equipment for $30,000 on January 1. It has a
five-year useful life and no salvage value. What is the adjusting entry for
depreciation on December 31 of the first year using straight-line depreciation?
A) Debit Depreciation Expense $6,000; Credit Accumulated Depreciation
$6,000
B) Debit Accumulated Depreciation $6,000; Credit Depreciation Expense
$6,000
C) Debit Equipment $6,000; Credit Cash $6,000
D) No entry is required in the first year.
Correct Answer: A
Straight-line depreciation is $30,000 ÷ 5 = $6,000 per year. The entry records
expense and increases the contra-asset account. Option B reverses the entry.
Option C is a purchase transaction, not depreciation. Option D ignores the
allocation of cost.
Question 7: An adjusted trial balance is prepared after all adjusting entries are
posted. What is its primary purpose?
A) To prove the equality of debits and credits after adjustments and to serve as
the basis for preparing financial statements.
B) To replace the need for a general ledger.
