Certified Bookkeeper (CB) Examination
Questions And Correct Answers
(Verified Answers) Plus Rationales 2026
Q&A | Instant Download Pdf
Question 1
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 Retained Earnings
Answer: C) Balance Sheet
Rationale: The balance sheet provides a snapshot of a company's assets,
liabilities, and equity at a specific date. The income statement covers a period of
time, while the statement of cash flows shows cash movements over a period.
Question 2
Under the accrual basis of accounting, revenue is recognized when:
A) Cash is received
B) The invoice is mailed
C) It is earned, regardless of when cash is received
D) The customer places an order
Answer: C) It is earned, regardless of when cash is received
Rationale: The accrual basis recognizes revenue when earned and expenses
,when incurred, matching principle dictates this approach. Cash basis would
recognize revenue only when cash is received.
Question 3
What is the normal balance for an expense account?
A) Debit
B) Credit
C) Either debit or credit
D) No normal balance
Answer: A) Debit
Rationale: Expenses increase with debits and decrease with credits, following
the expanded accounting equation. Assets, expenses, and dividends have normal
debit balances.
Question 4
Which of the following is a current asset?
A) Equipment
B) Land
C) Accounts Receivable
D) Buildings
Answer: C) Accounts Receivable
Rationale: Current assets are expected to be converted to cash within one year.
Accounts receivable typically qualify as current assets, while equipment, land,
and buildings are long-term assets.
Question 5
The accounting equation is:
,A) Assets = Liabilities + Owner's Equity
B) Assets + Liabilities = Owner's Equity
C) Assets = Liabilities - Owner's Equity
D) Assets + Owner's Equity = Liabilities
Answer: A) Assets = Liabilities + Owner's Equity
Rationale: This fundamental equation must always balance. It shows that assets
are financed by either creditors (liabilities) or owners (equity).
Question 6
A company purchases inventory on credit. This transaction:
A) Increases assets and increases liabilities
B) Increases assets and decreases liabilities
C) Decreases assets and increases liabilities
D) Decreases assets and decreases liabilities
Answer: A) Increases assets and increases liabilities
Rationale: Purchasing inventory (asset) increases assets, and purchasing on
credit increases accounts payable (liability). Both sides of the accounting
equation increase equally.
Question 7
What is the purpose of a trial balance?
A) To prepare financial statements
B) To verify that debits equal credits
C) To record transactions
D) To close the books
Answer: B) To verify that debits equal credits
Rationale: The trial balance tests the mathematical equality of debits and
credits after posting. It does not guarantee that transactions were recorded
correctly, but it does verify the ledger is in balance.
, Question 8
Depreciation is classified as which type of expense?
A) Operating expense
B) Non-operating expense
C) Extraordinary expense
D) Selling expense
Answer: A) Operating expense
Rationale: Depreciation is a systematic allocation of an asset's cost over its
useful life and is considered an operating expense as it relates to the core
operations of the business.
Question 9
Which account would be closed at the end of the accounting period?
A) Cash
B) Accounts Receivable
C) Service Revenue
D) Accounts Payable
Answer: C) Service Revenue
Rationale: Revenue accounts are temporary accounts that are closed to retained
earnings or the owner's capital account at period end. Balance sheet accounts
(permanent) are not closed.
Question 10
The lower of cost or market (LCM) rule applies to:
A) Accounts receivable
B) Inventory
Questions And Correct Answers
(Verified Answers) Plus Rationales 2026
Q&A | Instant Download Pdf
Question 1
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 Retained Earnings
Answer: C) Balance Sheet
Rationale: The balance sheet provides a snapshot of a company's assets,
liabilities, and equity at a specific date. The income statement covers a period of
time, while the statement of cash flows shows cash movements over a period.
Question 2
Under the accrual basis of accounting, revenue is recognized when:
A) Cash is received
B) The invoice is mailed
C) It is earned, regardless of when cash is received
D) The customer places an order
Answer: C) It is earned, regardless of when cash is received
Rationale: The accrual basis recognizes revenue when earned and expenses
,when incurred, matching principle dictates this approach. Cash basis would
recognize revenue only when cash is received.
Question 3
What is the normal balance for an expense account?
A) Debit
B) Credit
C) Either debit or credit
D) No normal balance
Answer: A) Debit
Rationale: Expenses increase with debits and decrease with credits, following
the expanded accounting equation. Assets, expenses, and dividends have normal
debit balances.
Question 4
Which of the following is a current asset?
A) Equipment
B) Land
C) Accounts Receivable
D) Buildings
Answer: C) Accounts Receivable
Rationale: Current assets are expected to be converted to cash within one year.
Accounts receivable typically qualify as current assets, while equipment, land,
and buildings are long-term assets.
Question 5
The accounting equation is:
,A) Assets = Liabilities + Owner's Equity
B) Assets + Liabilities = Owner's Equity
C) Assets = Liabilities - Owner's Equity
D) Assets + Owner's Equity = Liabilities
Answer: A) Assets = Liabilities + Owner's Equity
Rationale: This fundamental equation must always balance. It shows that assets
are financed by either creditors (liabilities) or owners (equity).
Question 6
A company purchases inventory on credit. This transaction:
A) Increases assets and increases liabilities
B) Increases assets and decreases liabilities
C) Decreases assets and increases liabilities
D) Decreases assets and decreases liabilities
Answer: A) Increases assets and increases liabilities
Rationale: Purchasing inventory (asset) increases assets, and purchasing on
credit increases accounts payable (liability). Both sides of the accounting
equation increase equally.
Question 7
What is the purpose of a trial balance?
A) To prepare financial statements
B) To verify that debits equal credits
C) To record transactions
D) To close the books
Answer: B) To verify that debits equal credits
Rationale: The trial balance tests the mathematical equality of debits and
credits after posting. It does not guarantee that transactions were recorded
correctly, but it does verify the ledger is in balance.
, Question 8
Depreciation is classified as which type of expense?
A) Operating expense
B) Non-operating expense
C) Extraordinary expense
D) Selling expense
Answer: A) Operating expense
Rationale: Depreciation is a systematic allocation of an asset's cost over its
useful life and is considered an operating expense as it relates to the core
operations of the business.
Question 9
Which account would be closed at the end of the accounting period?
A) Cash
B) Accounts Receivable
C) Service Revenue
D) Accounts Payable
Answer: C) Service Revenue
Rationale: Revenue accounts are temporary accounts that are closed to retained
earnings or the owner's capital account at period end. Balance sheet accounts
(permanent) are not closed.
Question 10
The lower of cost or market (LCM) rule applies to:
A) Accounts receivable
B) Inventory
