QBO Skills practice questions

Advanced workflows: recurring, journal entries, contractors, loans

30 practice questions on advanced workflows: recurring, journal entries, contractors, loans, each with the answer and why it is right. From Questiva Consultants' QuickBooks Online skills test. The topic is covered in Chapter 10 of QuickBooks Online Step-by-Step.

1. A tenant pays the same $1,200 rent invoice by check on the first of every month. The bookkeeper opens last month's Receive Payment, looks for Make Recurring, and cannot find it. Why, and what should be memorized instead?

   1. Recurring transactions are only available in QuickBooks Online Advanced, so the subscription must be upgraded before anything can be memorized.
   2. Receive Payment is a second-stage transaction; QBO would not know which invoice to apply it to, so memorize the invoice instead.
   3. Payments can only be memorized when QuickBooks Payments is active, because the card or bank account on file is what makes the schedule run.
   4. The payment was opened from the customer record, where Make Recurring is hidden; re-enter it from + Create and the option will appear.

   Answer: B) Receive Payment is a second-stage transaction; QBO would not know which invoice to apply it to, so memorize the invoice instead.. First-stage transactions such as invoices, sales receipts, bills and journal entries can be memorized. Second-stage transactions, Receive Payment and Bill Payment, cannot, because QuickBooks Online would not know which invoice or bill to pay against. Recur the invoice, then receive each payment as it arrives. (Chapter 10 · Creating Recurring Transactions)

2. The cell-phone bill arrives around the 12th of every month and the amount changes each time. The bookkeeper wants QuickBooks Online to prompt for it without posting a wrong amount. Which recurring type should the bill template use?

   1. Scheduled, so the bill posts automatically on the 12th with last month's amount as a placeholder.
   2. Unscheduled, so the bill never posts until the bookkeeper searches the Recurring Transactions list for it.
   3. Scheduled with Automatically Send Emails on, so the carrier is notified when the bill is recorded.
   4. Reminder, so an alert appears and the amount can be edited before the bill is saved.

   Answer: D) Reminder, so an alert appears and the amount can be edited before the bill is saved.. A Reminder template adds an alert when it is time to process the transaction so the date, amount or details can be updated first. Scheduled runs automatically, which is right only when nothing changes; Unscheduled is a template you call up on demand with no prompt. (Chapter 10 · Creating Recurring Transactions)

3. A bookkeeper sets up a Scheduled recurring sales receipt that bills a customer's MasterCard $250 on the last day of every month. The company does not use QuickBooks Payments. After three months the income is on the Profit and Loss but no deposits have reached the bank. What went wrong?

   1. The template's interval was set to the last day of every 1 year instead of every 1 month, so only the first receipt has actually run.
   2. A sales receipt cannot charge a card; the template should have been an invoice with Automatically Send Emails so the customer could pay online.
   3. Without QuickBooks Payments the recurring sales receipt records the sale but never charges the card; the charge has to be run in the merchant portal.
   4. Recurring sales receipts post to Undeposited Funds (Payments to deposit), so nothing reaches the bank until a manual Bank Deposit is recorded each month.

   Answer: C) Without QuickBooks Payments the recurring sales receipt records the sale but never charges the card; the charge has to be run in the merchant portal.. A scheduled sales receipt only processes the card when QuickBooks Payments is active. Otherwise it records revenue that was never collected, so the workflow must be replicated in the merchant portal with matching dates and amounts. The deposit-to setting would delay the bank balance, not explain three months of missing money. (Chapter 10 · Memorizing a Transaction)

4. A supplier issues a $300 credit for damaged goods that were billed last month. The bookkeeper records it as a journal entry debiting Accounts Payable and crediting the expense account. What is wrong with that approach?

   1. Nothing; a journal entry that debits Accounts Payable is the standard way to reduce the balance owed to a vendor.
   2. The debit and credit are reversed; a credit from a vendor should credit Accounts Payable and debit the expense.
   3. A form exists for this job: enter a Vendor Credit, which can be applied against the vendor's next bill.
   4. The credit should have been entered as a Bill with a negative amount so it nets against the vendor's open balance.

   Answer: C) A form exists for this job: enter a Vendor Credit, which can be applied against the vendor's next bill.. The book's rule is to never use a journal entry when a form serves the purpose. A Vendor Credit reduces what you owe and can be applied to a specific bill in Pay Bills; a journal entry against A/P cannot be applied cleanly and leaves the vendor's balance and open bills out of step. (Chapter 10 · Using Journal Entries)

5. At year end the accountant says the company truck depreciated $2,400 this year, and the truck's Fixed Asset account has an Original Cost sub-account and a Depreciation sub-account. Which entry records it?

   1. Journal entry: Debit Depreciation Expense 2,400 / Credit the truck's Depreciation sub-account 2,400.
   2. An Expense paid from checking for $2,400, categorized to Depreciation Expense and dated December 31.
   3. Journal entry: Debit the truck's Original Cost sub-account 2,400 / Credit Depreciation Expense 2,400.
   4. Journal entry: Debit the truck's Depreciation sub-account 2,400 / Credit Depreciation Expense 2,400.

   Answer: A) Journal entry: Debit Depreciation Expense 2,400 / Credit the truck's Depreciation sub-account 2,400.. Depreciation is a non-cash expense, one of the book's appropriate uses for a journal entry. The expense is debited and the contra-asset Depreciation sub-account is credited, so the Balance Sheet shows the truck's remaining net book value. No cash moves, and reducing Original Cost would hide what the truck was bought for. (Chapter 10 · Using Journal Entries)

6. A company buys a $20,000 equipment trailer. It writes a $5,000 check for the down payment and the bank pays the remaining $15,000 directly to the dealer under a loan. The check has been entered and categorized to the Trailer fixed-asset account. Which journal entry records the loan?

   1. Debit Checking 15,000 / Credit Trailer Loan 15,000
   2. Debit Trailer 20,000 / Credit Trailer Loan 20,000
   3. Debit Equipment Expense 15,000 / Credit Trailer Loan 15,000
   4. Debit Trailer 15,000 / Credit Trailer Loan 15,000

   Answer: D) Debit Trailer 15,000 / Credit Trailer Loan 15,000. The loan money never touched checking; it moved between Balance Sheet accounts, which is why a journal entry is used. The trailer's cost rises by the financed $15,000 and the long-term liability rises by the same amount; with the $5,000 check the asset shows $20,000. Booking $20,000 to the loan double-counts the down payment. (Chapter 10 · Managing Loans)

7. The bank draws the $500 monthly trailer-loan payment from checking by ACH. This month's statement shows $450 applied to principal and $50 to interest. How should the payment be recorded?

   1. An Expense to the bank for $500, split $450 to the loan liability account and $50 to Interest Paid.
   2. A Transfer of $500 from checking to the loan liability account, since the money moved between two Balance Sheet accounts.
   3. An Expense to the bank for $500 categorized to Interest Paid, because the payment is a cost of borrowing.
   4. A Bill to the bank for $500 categorized to Loan Expense, paid through Pay Bills on the draft date.

   Answer: A) An Expense to the bank for $500, split $450 to the loan liability account and $50 to Interest Paid.. A loan payment is split between principal and interest, and the split changes every month, so the book records it as an Expense with two lines: the liability account for principal and Interest Paid for interest. A transfer ignores the interest expense; posting all $500 to interest never reduces the loan. (Chapter 10 · Making Loan Payments)

8. For the past twelve months a bookkeeper has categorized the entire $500 monthly loan payment to Interest Paid. The statements show roughly $450 of each payment was principal. What is the effect on the financial statements?

   1. Only the Profit and Loss is wrong; the Balance Sheet is unaffected because every payment correctly reduced the checking account balance.
   2. Expenses are overstated by about $5,400 and net income understated; the loan liability is overstated because it was never reduced.
   3. The trailer's fixed-asset balance is understated by about $5,400 and must be increased by journal entry.
   4. Cash is overstated by about $6,000 because the payments were recorded as expenses instead of against the bank account.

   Answer: B) Expenses are overstated by about $5,400 and net income understated; the loan liability is overstated because it was never reduced.. Principal repayments reduce a liability; they are not expenses. Twelve months of misposting pushed about $5,400 of principal into Interest Paid, overstating expenses and understating net income, while the Trailer Loan balance still shows the original amount. Cash and the fixed asset were recorded correctly. (Chapter 10 · Making Loan Payments)

9. The company hires a self-employed web designer who will be paid about $4,000 this year for services. The owner wants the designer to show up in the Contractors App and on a 1099 in January. What must the bookkeeper do?

   1. Set the designer up as an employee so that payments run through payroll each month.
   2. Get a W-9 and tick Track Payments for 1099 in the designer's Vendor Details.
   3. Add the designer as a customer with a Contractor custom field.
   4. Create a Class named Contractors and tag every payment with it.

   Answer: B) Get a W-9 and tick Track Payments for 1099 in the designer's Vendor Details.. A contractor is a vendor who provides services without being an employee. The IRS requires a W-9 at hire so you know whether a 1099 is due, and a vendor appears on the Contractors list only after Track Payments for 1099 is checked in Vendor Details. Employees, customers and classes are the wrong objects. (Chapter 10 · The Contractors App)

10. A $4,000 invoice that appeared on last month's A/R Aging Summary is no longer anywhere in the file. Three people have logins. How can the bookkeeper find out what happened to it?

    1. Run the Reconciliation report for the month and look for a $4,000 item that was cleared without a matching invoice.
    2. Run Transaction List by Customer for the period and compare each line to last month's aging report.
    3. Ask the bank for a copy of the customer's $4,000 payment so the invoice can be re-created and marked paid.
    4. Open the Audit Log from the Settings gear and filter by date, user or event to see who deleted or changed it.

    Answer: D) Open the Audit Log from the Settings gear and filter by date, user or event to see who deleted or changed it.. The Audit Log records every addition, deletion and modification with the date, time and user, and it cannot be altered. Filtering by user, date changed or event type pinpoints the deletion. A reconciliation report covers bank activity, not invoices, and a transaction list will simply not show a deleted one. (Chapter 10 · The Audit Log)

11. The owner forwards an $86 hardware-store receipt to the company's receipts email address. The card charge will appear in the Bank transactions feed in a day or two. What should the bookkeeper do so the purchase is recorded once, with the receipt attached?

    1. Create the Expense from the receipt in the Receipts App, then Match the card charge to it when it arrives in the feed.
    2. Ignore the forwarded receipt; when the charge lands in the feed, Add it as a new expense and the image will attach itself.
    3. Create the Expense from the receipt and also Add the card charge from the feed, so the receipt and the bank record both exist.
    4. Enter the receipt as a Bill to the hardware store and pay it through Pay Bills when the charge shows up in the feed.

    Answer: A) Create the Expense from the receipt in the Receipts App, then Match the card charge to it when it arrives in the feed.. The Receipts App reads the image and lets you create an Expense (or Bill) with the receipt attached; when the payment shows up in the Bank transactions feed it matches that transaction. Adding the feed line as a second expense double-counts the purchase, and a bill is wrong for a card purchase already paid. (Chapter 10 · The Receipts App)

12. An employee uses her own car for work. On Tuesday she drives 12 miles from home to the office, 20 miles from the office to a client site, 20 miles back to the office, and 12 miles home. The company reimburses business mileage through an accountable plan. How many miles should be logged as business in the Mileage App?

    1. 64 miles, the whole day's driving on a work day.
    2. 52 miles, everything except the final trip home.
    3. 40 miles, the office-to-client round trip only.
    4. 0 miles, because a personal vehicle never qualifies.

    Answer: C) 40 miles, the office-to-client round trip only.. Only trips between business locations count; travel between home and the office is a commute and is not deductible. The 20-mile round trip to the client is the business mileage. A personal vehicle used for business is tracked and reimbursed by the mile, which is exactly what the Mileage App and an accountable plan are for. (Chapter 10 · Tracking Vehicle Mileage)

13. Marisol runs three field crews whose members buy fuel and supplies on company cards. She wants their receipts to reach QuickBooks Online as they are issued, without giving any crew member a login. What should she set up?

    1. Open Manage Settings in the Receipts App, use Edit Email to create a short custom address, and hand the crews the expenses version of it.
    2. Add each crew member to the company file as a Company Admin so they can upload their own receipt images.
    3. Collect the receipts by text message and bring each image in with Upload from Google Drive at the end of the week.
    4. Have the crews mail the paper receipts to the office, then attach each scan to its transaction by hand.

    Answer: A) Open Manage Settings in the Receipts App, use Edit Email to create a short custom address, and hand the crews the expenses version of it.. Manage Settings and Edit Email personalize the front of the company's receipt address, and QuickBooks Online then offers two variations, one for expenses and one for sales. Vendors, customers and employees can all use it, and Block Senders keeps bad actors out. Admin logins, Google Drive and hand-scanning are all more work than forwarding. (Chapter 10 · The Receipts App)

14. An IRS examiner asks Craig's Landscaping to support a $340 charge at a big-box store. The bookkeeper has the credit card statement showing the date, the store and the amount. What does the examiner still need, and why?

    1. Nothing more — the charge was reconciled and appears on that month's reconciliation report, which supports it.
    2. Nothing more — the expense is categorized to Office Supplies, and the category records the business purpose.
    3. The itemized receipt attached to the transaction; a statement does not itemize, so it cannot show the supplies were for the office, not the home.
    4. A printed paper copy of the receipt, because the IRS accepts electronic images only for the current year.

    Answer: C) The itemized receipt attached to the transaction; a statement does not itemize, so it cannot show the supplies were for the office, not the home.. Bank and credit card statements are not sufficient — the itemized receipt is what demonstrates to the IRS that the supplies were for the office rather than the home, and receipts are kept seven years. Electronic copies attached to the transaction satisfy the requirement, so nothing needs printing, and a reconciliation or a category proves neither. (Chapter 10 · The Receipts App)

15. Craig's Landscaping holds the title to a new Ford F150. The owner also drives her own SUV out to job sites two or three days a week. How should the costs of the two vehicles be handled?

    1. Both vehicles' fuel, loan and maintenance costs are business deductions as long as every trip is logged in the Mileage App.
    2. The F150's loan, fuel and maintenance are business deductions; the SUV's business trips are tracked and reimbursed by the mile.
    3. Both vehicles are tracked by the mile, because the rate in the Mileage App already covers fuel and maintenance for any vehicle.
    4. The F150 is tracked by the mile and the SUV's actual running costs are deducted, since the company vehicle is the easier one to log.

    Answer: B) The F150's loan, fuel and maintenance are business deductions; the SUV's business trips are tracked and reimbursed by the mile.. When the business's name is on the title, that vehicle's loan, fuel and maintenance costs are categorized as business deductions. A vehicle owned by the owner or an employee is not the company's to run — its business use is tracked by the mile and reimbursed, often through an accountable plan. The two treatments are not interchangeable. (Chapter 10 · Tracking Vehicle Mileage)

16. Rita logs 240 business miles driving to a client's photo shoot. She wants the mileage billed on that client's next invoice and paid back to her photographer on his next paycheck. What does she have to do in QuickBooks Online?

    1. Switch on billable expense tracking, after which logged trips appear in the client's unbilled charges, then add the paycheck line by hand.
    2. Add the mileage to the invoice and to the paycheck by hand, because the trip log only produces the tax deduction.
    3. Mark the trip Billable in the Add Trip window, which sends the cost to the invoice and to payroll together.
    4. Re-enter the trip as Personal, which moves it out of the deduction and makes it reimbursable instead.

    Answer: B) Add the mileage to the invoice and to the paycheck by hand, because the trip log only produces the tax deduction.. Mileage tracking cannot put mileage costs on paychecks, invoices or bills; pass-through travel expenses must be created manually. Billable expense tracking works on expense transactions, not on the trip log, the Add Trip window offers no Billable option, and marking a trip Personal only excludes it from the mileage calculation. (Chapter 10 · Tracking Vehicle Mileage)

17. Craig's Landscaping has no payroll subscription and pays four 1099 subcontractors at the end of every month. In the Contractors App, the Pay Contractors button prompts the bookkeeper to subscribe. How can she pay them today?

    1. Click Write Check beside each contractor, or use its drop-down arrow to create a credit card Expense or a Bill.
    2. Open Payroll in All Apps and use the Contractors page there, which pays by Direct Deposit without a subscription.
    3. Record each payment as a journal entry crediting checking and debiting Subcontractor Expense, then file 1099s in January.
    4. Pay them from the Vendors App instead, because payments made in the Contractors App are not tracked for 1099s.

    Answer: A) Click Write Check beside each contractor, or use its drop-down arrow to create a credit card Expense or a Bill.. Write Check pays a contractor from inside the Contractors App, and the drop-down creates a credit card Expense or a Bill. Bulk Direct Deposit through Pay Contractors needs QuickBooks Payroll or the standalone Contractor Payments plan, and the Payroll location is the identical app. 1099 tracking follows the vendor's setting whichever form records the payment. (Chapter 10 · Paying Contractors)

18. A new subcontractor starts in March and the owner wants his W-9 on file before the first check is cut, without printing or scanning anything. What does the Contractors App let her do?

    1. Generate a blank 1099-NEC for him to sign and return, which stands in for the W-9 until January.
    2. Tick Track Payments for 1099 on his vendor record, which pulls his tax ID from the IRS automatically.
    3. Invite him to fill out his W-9 electronically; the completed form appears on his Documents tab.
    4. Send him the company's receipt-forwarding address so his tax details are read off the documents he emails in.

    Answer: C) Invite him to fill out his W-9 electronically; the completed form appears on his Documents tab.. The Contractors App invites service vendors to complete their W-9 electronically, and the form lands on that contractor's Documents tab. A 1099-NEC is what the company files in January, not what a contractor signs at hire; Track Payments for 1099 only puts him on the Contractors list, and receipt forwarding has nothing to do with tax forms. (Chapter 10 · The Contractors App)

19. Each payroll run posts a journal entry with the same eight lines, but the date and amounts change every time. What should you set up?

    1. A Scheduled recurring journal entry that posts monthly on its own
    2. An Unscheduled recurring journal entry you call up each time
    3. A Reminder recurring journal entry that alerts you on a set day
    4. Nothing. Journal entries can't be memorized, so you duplicate the last one

    Answer: B) An Unscheduled recurring journal entry you call up each time. Unscheduled templates hold complex transactions you call up when needed, and the book uses payroll journal entries as its example. A Scheduled entry would post the same amounts every time. (Chapter 10 · Creating Recurring Transactions)

20. A customer billed by a scheduled $250 monthly sales receipt is closing for a two-month renovation and will reopen in the spring. Which action on the Recurring Transactions list is built to stop the receipts in the meantime?

    1. Skip Next Date, which passes over the next occurrence and lets the one after it run as scheduled.
    2. Delete, then rebuild the template in the spring from the last posted receipt.
    3. Edit, changing the Type to Unscheduled and switching it back to Scheduled in the spring.
    4. Pause, which stops the template from triggering until it is resumed.

    Answer: D) Pause, which stops the template from triggering until it is resumed.. Pause and Skip Next Date both keep a scheduled template from triggering, but Skip Next Date skips only the next occurrence and this closure spans two. Pause holds the template with its interval, options and lines intact until it is resumed. Deleting throws the setup away, and changing the type is a workaround for a purpose-built action. (Chapter 10 · Using, Editing, and Managing Recurring Transactions)

21. Doug's $500 van loan payment splits differently every month. The bookkeeper builds a Reminder recurring expense, types 0 in both amount lines, and puts "Total monthly payment is $500" and "3% interest" in the Descriptions. A colleague says the zeros are a mistake. Who is right?

    1. The colleague — a recurring template will not save with zero amounts, so last month's split has to stay on the lines.
    2. The colleague — the principal line should carry the whole $500 so the payment total can never be entered short.
    3. The bookkeeper — zeros force the real split to be keyed off the statement, and the Descriptions carry the instructions.
    4. The bookkeeper — a Reminder ignores its amount lines entirely, so whatever is typed there makes no difference.

    Answer: C) The bookkeeper — zeros force the real split to be keyed off the statement, and the Descriptions carry the instructions.. The principal and interest split changes every month, so leaving last month's amounts on the template invites data-entry errors when the reminder is processed. Zeros make the real figures impossible to skip, and the Description fields carry the instructions for working them out. Templates save with zeros, and a Reminder opens with whatever amounts were saved. (Chapter 10 · Creating Recurring Transactions)

22. Sam starts a journal entry to reclassify several accounts. On line 1 he debits Prepaid Insurance 12,000; when he tabs down to line 2, QuickBooks Online has already filled 12,000 into the Credits column. What is going on?

    1. QBO fills in the amount needed to balance so far; he can type over it and keep building until the last line.
    2. QBO has posted the balancing side to Opening Balance Equity, so that line must be deleted and the entry rebuilt.
    3. QBO found a matching transaction and is offering to link the journal entry to it; accepting the match clears the line.
    4. QBO allows only two lines on a journal entry, so this pair has to be saved before the other accounts are entered.

    Answer: A) QBO fills in the amount needed to balance so far; he can type over it and keep building until the last line.. Every time you move to the next line, QuickBooks Online enters the remaining amount needed to make the debits and credits balance, and you simply override it as you build the transaction. Nothing has posted to equity, the figure is arithmetic rather than a match to another transaction, and a journal entry can carry many lines. (Chapter 10 · Using Journal Entries)

23. Craig's paid $12,000 for a year of liability coverage and booked it to the Prepaid Insurance asset account. Each month $1,000 has to move to Insurance Expense. The bookkeeper opens a Transfer and cannot find Insurance Expense in either account list. What should she do?

    1. Re-categorize the original $12,000 payment to Insurance Expense, since the whole year is going to be expensed anyway.
    2. Enter a $1,000 Expense from checking each month to Insurance Expense, then clear the prepaid balance at year end.
    3. Make Prepaid Insurance a sub-account of Insurance Expense so the balance rolls into the expense on its own.
    4. Post a monthly journal entry — Transfer forms cannot move funds between a Balance Sheet and a Profit and Loss account.

    Answer: D) Post a monthly journal entry — Transfer forms cannot move funds between a Balance Sheet and a Profit and Loss account.. Distributing a prepaid expense across the year is one of the book's named uses for a journal entry: debit Insurance Expense, credit Prepaid Insurance each month. Transfers only move money between Balance Sheet accounts. Re-coding the payment expenses twelve months at once, a cash Expense double-counts money that already left, and sub-accounts do not move balances. (Chapter 10 · Using Journal Entries)

24. A $6,000 general liability insurance bill was entered and paid with no class, while the company tracks Overhead, Walnut Creek and Downtown. The controller wants $2,000 sitting in each class without changing the total expense. What records that?

    1. A journal entry debiting a new insurance expense account for each class $2,000 and crediting Insurance Expense $6,000.
    2. A journal entry with three $2,000 debit lines to Insurance Expense, one per class, and a $6,000 credit line to Insurance Expense with no class.
    3. Editing the paid bill down to $2,000 for Overhead, then entering two more $2,000 bills tagged to the other two classes.
    4. A Transfer of $2,000 to each class out of Insurance Expense, since classes behave like sub-accounts of an expense.

    Answer: B) A journal entry with three $2,000 debit lines to Insurance Expense, one per class, and a $6,000 credit line to Insurance Expense with no class.. Allocating account balances across classes, customers and jobs is one of the book's uses for a journal entry. Three classed debits and one unclassed credit to the same account leave the $6,000 total untouched while Profit and Loss by Class splits evenly. New per-class accounts fragment the chart, extra bills leave two payables unpaid, and Transfers move money between Balance Sheet accounts. (Chapter 10 · Using Journal Entries)

25. Setting up the $15,000 trailer loan, the bookkeeper creates the Long Term Liabilities account and types 15,000 into the Unpaid Balance field. She then posts the journal entry that debits Trailer 15,000 and credits Trailer Loan 15,000. What is the result?

    1. The loan is right; the Unpaid Balance field only records the original loan amount for reference on the account.
    2. The journal entry is rejected, because the liability account already carries a balance from the way it was set up.
    3. Trailer Loan shows $30,000, and the opening balance has parked another $15,000 in Opening Balance Equity.
    4. Trailer Loan shows $15,000 but the Trailer fixed asset is overstated by $15,000 and needs a correcting entry.

    Answer: C) Trailer Loan shows $30,000, and the opening balance has parked another $15,000 in Opening Balance Equity.. An amount typed into Unpaid Balance posts its own opening-balance transaction against Opening Balance Equity, so the manual journal entry doubles the liability. That is why the book says to skip the Unpaid Balance fields and create the loan manually — the journal entry sets both the asset and the liability, and QuickBooks Online will not refuse it. (Chapter 10 · Setting up Loans)

26. Before the $15,000 trailer loan can be recorded, three accounts have to exist in the Chart of Accounts. Which Account Types belong to the trailer, the note and the finance charge?

    1. Other Current Assets for the trailer, Credit Card for the loan, Other Expense for Interest Paid.
    2. Expenses for the trailer, Long Term Liabilities for the loan, Expenses for Interest Paid.
    3. Fixed Assets for the trailer, Other Current Liabilities for the loan, Cost of Goods Sold for Interest Paid.
    4. Fixed Assets for the trailer, Long Term Liabilities for the loan, Expenses for Interest Paid.

    Answer: D) Fixed Assets for the trailer, Long Term Liabilities for the loan, Expenses for Interest Paid.. The trailer is a Fixed Asset with the Machinery & Equipment detail type, the note is a Long Term Liability with the Notes Payable detail type, and interest is an ordinary Expense — filter the Chart of Accounts first, because most files already have an Interest Paid account. Equipment bought with a loan is capitalized, never expensed. (Chapter 10 · Setting up Loans)

27. The trailer loan statement shows the payment that posted on March 1 as $452.11 principal and $47.89 interest, and the projected April 1 payment as $454.02 principal and $45.98 interest. The bookkeeper is recording the March payment. Which figures does the Expense carry?

    1. $452.11 and $47.89, the split from the payment that has already left the checking account.
    2. $454.02 and $45.98, because a statement's most recent figures are the ones that post next.
    3. $500.00 to the Trailer Loan account, with the interest separated out when the loan is reconciled at year end.
    4. $453.07 and $46.93, the average of the two months, because the split shifts a little every month.

    Answer: A) $452.11 and $47.89, the split from the payment that has already left the checking account.. Loan statements are easy to misread — enter the previous month's split, not the upcoming month's. The March payment is the one that left checking, so its principal and interest are what the Expense records. Posting the whole $500 to the liability overstates the payoff and hides interest expense, and averaging invents amounts the lender never charged. (Chapter 10 · Making Loan Payments)

28. National Bank approves a $30,000 working-capital loan for Craig's and deposits the money straight into the business checking account. No vehicle or equipment is being purchased. How is the funding recorded?

    1. A Deposit to checking for $30,000 categorized to Other Income, since the money is new to the business.
    2. A journal entry debiting Checking $30,000 and crediting the loan's Long Term Liability account $30,000.
    3. A journal entry debiting the loan's Long Term Liability account $30,000 and crediting Checking $30,000.
    4. A Bill from National Bank for $30,000, so the debt sits in Accounts Payable until the loan is paid off.

    Answer: B) A journal entry debiting Checking $30,000 and crediting the loan's Long Term Liability account $30,000.. Setting up a loan debits the bank account or the fixed asset and credits the loan's Long Term Liability account, so one entry records the cash and the debt together. Loan proceeds are borrowed money, not revenue; reversing the debit and credit drives checking down and the liability into a debit balance; and a bank note is not a vendor payable. (Chapter 10 · Managing Loans)

29. A customer insists her $1,850 invoice used to show a different due date and a different amount. The invoice is still in the file, and three people have logins. Where can the bookkeeper see exactly what changed and who changed it?

    1. The Transaction Journal on the invoice, which lists every version posted since it was first created.
    2. The Audit Log filtered to deleted and voided events, the only view that records changes to a transaction.
    3. More Actions and Audit History on the invoice, whose timeline compares any two versions with the edits highlighted.
    4. The customer's Payments tab, which keeps a copy of every version of the invoice that was emailed out.

    Answer: C) More Actions and Audit History on the invoice, whose timeline compares any two versions with the edits highlighted.. Audit History opens from the More Actions button at the bottom of any transaction. Each timeline entry shows the transaction as it stood on that date, and View Mode compares two instances with the changes highlighted in color. A Transaction Journal shows only the current debits and credits, and a deleted-and-voided filter would exclude an edit to a live invoice. (Chapter 10 · The Audit Log)

30. A staff member deleted six invoices by mistake, re-entered them, and asks the bookkeeper to clear those entries out of the Audit Log before the accountant's review. What should the bookkeeper tell her?

    1. Closing the books through that date locks the period and drops the earlier entries out of the log.
    2. Filtering the log by user and event type is what removes an entry, and only a Company Admin may do it.
    3. Voiding the re-entered invoices rather than deleting the originals would have kept the mistake off the log.
    4. The log cannot be altered — it holds every addition, deletion and change with the user, date and time.

    Answer: D) The log cannot be altered — it holds every addition, deletion and change with the user, date and time.. The Audit Log records all transaction activity and cannot be manually altered. Filtering by User, Date Changed or Event type changes only what you are looking at, never what is stored. Closing the books locks a period for editing but leaves the log intact, and a void is a modification the log records like any other. (Chapter 10 · The Audit Log)