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Business Accounting Basics

Instructions:

Answer 50 questions in 15 minutes.
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Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.

1. Balance Sheet Assets
an appraised value for land gives additional information that is useful to investors
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
does the equation remain in balance?

2. Dividends
each owner has its own books - records - financial statements that are seperate.
wages payable - utilities payable - interest payable - unearned revenue - note payable
Net Income/Sales
Debit Balance - Retained Earnings - Temporary - Owners Equity

3. Economic Equity
each owner has its own books - records - financial statements that are seperate.
does the equation remain in balance?
credit balance - balance sheet - permanent - liabilities
Debit Balance - Income Statement - Temporary - expense

4. Profit Margin %
Net Income/Sales
prepare post-closing trial balance
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
prepare adjusted trial balance

5. Intangibles
Revenues-Expenses
copyright - long term assets - noncurrent
to those willing to take time to understand it
Debit Balance - Income Statement - Temporary - expense

6. 5th step of Accounting Cycle
record adjusting entries to general journal
cost-salvage value/years of life
determine the direction of the effect. debit or credit
Net Income/Sales

7. Materiality

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8. 9th step of Accounting Cycle
prepare closing entry-post to general ledger
record transactions in general journal
companies must reduce the value of land - if the value is lower than its original cost.
Current Assets/Current Liabilities

9. Prepaid insurance
Revenues and Expenses
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
credit balance - income statement - temporary - Revenue
debit balance - balance sheet - permanent - asset

10. Sales revenue
debit balance - income statement - temporary - expense
Payment x Rate x Time
credit balance - income statement - temporary - Revenue
(cash - accts revievable - inventory) turn into cash within 12 months

11. Cash Principle
credit balance - balance sheet - permanent - liabilities
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
prepare adjusted trial balance
Contributed Capital - Retained Earnings - Dividends

12. 7th step of Accounting Cycle
Credit Balance - Balance Sheet - permanent - liability
prepare adjusted trial balance
record adjusting entries to general journal
debit balance - balance sheet - permanent - asset

13. Multistep Income Statement
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
Identify Accounts affected
prepare adjusted trial balance
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

14. Unearned revenue
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
credit balance - balance sheet - permanent - liabilities
to those willing to take time to understand it
similar to unearned revenue- liabilities

15. Closing Entries
Close out all revenue and expense accounts into retained earnings.
prepare Unadjusted trial balance
cost-salvage value/years of life
how we measure - assumes economic mean

16. Balance Sheet Liabilities
wages payable - utilities payable - interest payable - unearned revenue - note payable
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Identify Accounts affected
credit balance - balance sheet - permanent - liabilities

17. 2nd step of Accounting Cycle
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
record transactions in general journal
wages payable - utilities payable - interest payable - unearned revenue - note payable
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income

18. 4th step of Accounting Cycle
Payment x Rate x Time
debit balance - income statement - temporary - expense
Contra Asset - noncurrent asset
prepare Unadjusted trial balance

19. 4th step of analyzing transactions
debit balance - balance sheet - permanent - asset
does the equation remain in balance?
credit balance - balance sheet - permanent - liabilities
Credit balance - Balance sheet and Retained Earnings - Permanent

20. Interest Revenue
copyright - long term assets - noncurrent
Credit balance - income statement - temporary - revenues
determine the direction of the effect. debit or credit
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

21. Note Payable
Credit Balance - Balance Sheet - permanent - liability
credit balance - income statement - temporary - Revenue
prepare closing entry-post to general ledger
the original amount to purchase land is verifiable through the contract documents

22. Goodwill
the original amount to purchase land is verifiable through the contract documents
debit balance - income statement - temporary - expense
each owner has its own books - records - financial statements that are seperate.
debit balance - balance sheet - permanent - asset

23. 8th step of Accounting Cycle
similar to unearned revenue- liabilities
prepare financial statements
Debit Balance - Retained Earnings - Temporary - Owners Equity
record transactions in general journal

24. Understandability
debit balance - income statement - temporary - expense
Net Income/Sales
each owner has its own books - records - financial statements that are seperate.
to those willing to take time to understand it

25. 3rd step of analyzing transactions
wages payable - utilities payable - interest payable - unearned revenue - note payable
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
prepar journal to general ledger
determine the direction of the effect. debit or credit

26. Calculating Interest Formula
Debit Balance - Retained Earnings - Temporary - Owners Equity
Assets - Liabilities - Equity
Payment x Rate x Time
prepare Unadjusted trial balance

27. Building
Credit balance - Balance sheet and Retained Earnings - Permanent
Debit Balance - Income Statement - temporary - Expense
Revenues-Expenses
debit balance - Balance sheet - Permanent - asset

28. Consistency
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
credit balance - balance sheet - permanent - liabilities
a company uses the same method each year for calculating inventory
credit balance - income statement - temporary - Revenue

29. 3rd step of Accounting Cycle
does the equation remain in balance?
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
record adjusting entries to general journal
prepar journal to general ledger

30. Inventory
Debit Balance - Income Statement - Temporary - expense
record transactions in general journal
Retained earnings beg. balance - Net income - dividends.
debit balance - Balance sheet - permanent - asset

31. Accounts Recievable
debit balance - income statement - temporary - expense
Payment x Rate x Time
prepare Unadjusted trial balance
Debit Balance - Balance sheet - permanent - asset

32. 6th step of Accounting Cycle
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
an appraised value for land gives additional information that is useful to investors
analyze transactions from external events
post journal to general ledger

33. Monetary Unit
how we measure - assumes economic mean
credit balance - balance sheet - permanent - liabilities
prepare Unadjusted trial balance
a company uses the same method each year for calculating inventory

34. Accumlated depreciation
Credit balance - income statement - temporary - revenues
Contra Asset - noncurrent asset
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income

35. Accts on Statement of Retained Earnings
Contributed Capital - Retained Earnings - Dividends
Retained earnings beg. balance - Net income - dividends.
determine the direction of the effect. debit or credit
post journal to general ledger

36. Interest Expense
Debit Balance - Income Statement - temporary - Expense
Contra Asset - noncurrent asset
Credit balance - Balance sheet and Retained Earnings - Permanent
longterm liabilities

37. 10th step of Accounting Cycle
an appraised value for land gives additional information that is useful to investors
prepare post-closing trial balance
record transactions in general journal
a company uses the same method each year for calculating inventory

38. Going Concern
cost-salvage value/years of life
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Close out all revenue and expense accounts into retained earnings.
Contributed Capital - Retained Earnings - Dividends

39. Cost of Goods Sold
does the equation remain in balance?
determine the direction of the effect. debit or credit
Debit Balance - Income Statement - Temporary - expense
(long-term) assets (building - land - equipment)

40. Conservatism
debit balance - Balance sheet - Permanent - asset
companies must reduce the value of land - if the value is lower than its original cost.
debit balance - balance sheet - permanent - asset
credit balance - balance sheet - permanent - liabilities

41. Relevance
Payment x Rate x Time
an appraised value for land gives additional information that is useful to investors
credit balance - balance sheet - permanent - liabilities
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

42. Common Stock
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
Credit Balance - Balance Sheet - Permanent - owners equity
record transactions in general journal
does the equation remain in balance?

43. NonCurrent Liabilities
prepar journal to general ledger
longterm liabilities
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
to those willing to take time to understand it

44. 1st step of Accounting Cycle
analyze transactions from external events
determine the direction of the effect. debit or credit
Retained earnings beg. balance - Net income - dividends.
post journal to general ledger

45. Accounts on Income Statement
Sales Revenues
Revenues and Expenses
a company uses the same method each year for calculating inventory
record adjusting entries to general journal

46. Reliability
a company uses the same method each year for calculating inventory
the original amount to purchase land is verifiable through the contract documents
determine the direction of the effect. debit or credit
Identify Accounts affected

47. Accounting Equation
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
record adjusting entries to general journal
Current Assets/Current Liabilities
cost-salvage value/years of life

48. Retained Earnings
Credit balance - Balance sheet and Retained Earnings - Permanent
an appraised value for land gives additional information that is useful to investors
the original amount to purchase land is verifiable through the contract documents
how we measure - assumes economic mean

49. Calculating Cost depreciation
Contributed Capital - Retained Earnings - Dividends
cost-salvage value/years of life
determine the direction of the effect. debit or credit
prepare Unadjusted trial balance

50. Current Assets
Debit Balance - Income Statement - temporary - Expense
an appraised value for land gives additional information that is useful to investors
debit balance - Balance sheet - permanent - asset
(cash - accts revievable - inventory) turn into cash within 12 months

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Business Accounting Basics

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