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Business Accounting Basics

Instructions:

Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can study here.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

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. Income Statement Revenues
Sales Revenues
Credit Balance - Balance Sheet - Permanent - owners equity
cost-salvage value/years of life
Debit Balance - Retained Earnings - Temporary - Owners Equity

2. 8th step of Accounting Cycle
each owner has its own books - records - financial statements that are seperate.
prepare financial statements
post journal to general ledger
credit balance - balance sheet - permanent - liabilities

3. Balance Sheet Assets
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
prepare post-closing trial balance
Contributed Capital - Retained Earnings - Dividends
Close out all revenue and expense accounts into retained earnings.

4. NonCurrent Liabilities
longterm liabilities
Sales Revenues
prepare closing entry-post to general ledger
Contributed Capital - Retained Earnings - Dividends

5. Calculating Net Income
Revenues-Expenses
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
a company uses the same method each year for calculating inventory
Payment x Rate x Time

6. Inventory
decrease equity - debit balance
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
debit balance - Balance sheet - permanent - asset
Close out all revenue and expense accounts into retained earnings.

7. Utilities expense
prepare financial statements
Net Income/Sales
does the equation remain in balance?
debit balance - income statement - temporary - expense

8. Sales revenue
credit balance - income statement - temporary - Revenue
prepar journal to general ledger
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
copyright - long term assets - noncurrent

9. 4th step of Accounting Cycle
Assets - Liabilities - Equity
Retained earnings beg. balance - Net income - dividends.
prepare Unadjusted trial balance
similar to unearned revenue- liabilities

10. Balance Sheet Liabilities
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
prepare Unadjusted trial balance
wages payable - utilities payable - interest payable - unearned revenue - note payable
Contra Asset - noncurrent asset

11. Current Assets
(cash - accts revievable - inventory) turn into cash within 12 months
to those willing to take time to understand it
Payment x Rate x Time
credit balance - balance sheet - permanent - liabilities

12. Consistency
a company uses the same method each year for calculating inventory
prepare adjusted trial balance
Identify Accounts affected
prepar journal to general ledger

13. Intangibles
copyright - long term assets - noncurrent
analyze transactions from external events
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Revenues-Expenses

14. Goodwill
credit balance - balance sheet - permanent - liabilities
Sales Revenues
prepare post-closing trial balance
debit balance - balance sheet - permanent - asset

15. Note Payable
Debit Balance - Income Statement - Temporary - expense
Current Assets/Current Liabilities
companies must reduce the value of land - if the value is lower than its original cost.
Credit Balance - Balance Sheet - permanent - liability

16. Materiality

17. 7th step of Accounting Cycle
prepare adjusted trial balance
Payment x Rate x Time
Contra Asset - noncurrent asset
credit balance - balance sheet - permanent - liabilities

18. Cash Principle
determine the direction of the effect. debit or credit
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Credit balance - income statement - temporary - revenues

19. Retained Earnings
wages payable - utilities payable - interest payable - unearned revenue - note payable
the original amount to purchase land is verifiable through the contract documents
Credit balance - Balance sheet and Retained Earnings - Permanent
similar to unearned revenue- liabilities

20. Prepaid insurance
similar to unearned revenue- liabilities
debit balance - balance sheet - permanent - asset
a company uses the same method each year for calculating inventory
Credit balance - Balance sheet and Retained Earnings - Permanent

21. Calculating Interest Formula
Payment x Rate x Time
Close out all revenue and expense accounts into retained earnings.
prepare Unadjusted trial balance
prepare closing entry-post to general ledger

22. 2nd step of analyzing transactions
Debit Balance - Income Statement - temporary - Expense
each owner has its own books - records - financial statements that are seperate.
to those willing to take time to understand it
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

23. Cost of Goods Sold
Credit Balance - Balance Sheet - permanent - liability
Contributed Capital - Retained Earnings - Dividends
Debit Balance - Income Statement - Temporary - expense
prepare financial statements

24. Dividends
Debit Balance - Balance sheet - permanent - asset
debit balance - balance sheet - permanent - asset
(long-term) assets (building - land - equipment)
decrease equity - debit balance

25. 9th step of Accounting Cycle
longterm liabilities
prepare closing entry-post to general ledger
how we measure - assumes economic mean
decrease equity - debit balance

26. Profit Margin %
Debit Balance - Income Statement - temporary - Expense
Net Income/Sales
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
debit balance - Balance sheet - permanent - asset

27. Common Stock
Credit Balance - Balance Sheet - Permanent - owners equity
cost-salvage value/years of life
credit balance - income statement - temporary - Revenue
prepare adjusted trial balance

28. 6th step of Accounting Cycle
debit balance - balance sheet - permanent - asset
post journal to general ledger
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
the original amount to purchase land is verifiable through the contract documents

29. Dividends
Sales Revenues
how we measure - assumes economic mean
Credit balance - income statement - temporary - revenues
Debit Balance - Retained Earnings - Temporary - Owners Equity

30. 2nd step of Accounting Cycle
longterm liabilities
record transactions in general journal
credit balance - balance sheet - permanent - liabilities
to those willing to take time to understand it

31. Understandability
longterm liabilities
to those willing to take time to understand it
Credit Balance - Balance Sheet - Permanent - owners equity
Assets - Liabilities - Equity

32. Accts on Statement of Retained Earnings
Retained earnings beg. balance - Net income - dividends.
cost-salvage value/years of life
how we measure - assumes economic mean
credit balance - balance sheet - permanent - liabilities

33. Reliability
the original amount to purchase land is verifiable through the contract documents
Debit Balance - Income Statement - Temporary - expense
prepare closing entry-post to general ledger
Credit Balance - Balance Sheet - permanent - liability

34. 10th step of Accounting Cycle
Credit Balance - Balance Sheet - permanent - liability
Credit balance - Balance sheet and Retained Earnings - Permanent
prepare post-closing trial balance
Revenues and Expenses

35. Interest Revenue
a company uses the same method each year for calculating inventory
Credit balance - Balance sheet and Retained Earnings - Permanent
Net Income/Sales
Credit balance - income statement - temporary - revenues

36. Balance sheet Equity
credit balance - balance sheet - permanent - liabilities
Debit Balance - Balance sheet - permanent - asset
credit balance - income statement - temporary - Revenue
Contributed Capital - Retained Earnings - Dividends

37. Calculating Cost depreciation
cost-salvage value/years of life
prepare adjusted trial balance
wages payable - utilities payable - interest payable - unearned revenue - note payable
debit balance - income statement - temporary - expense

38. Accounting Equation
Revenues-Expenses
Sales Revenues
determine the direction of the effect. debit or credit
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

39. Customer deposits
similar to unearned revenue- liabilities
longterm liabilities
an appraised value for land gives additional information that is useful to investors
decrease equity - debit balance

40. Accounts Recievable
Debit Balance - Income Statement - Temporary - expense
to those willing to take time to understand it
does the equation remain in balance?
Debit Balance - Balance sheet - permanent - asset

41. Closing Entries
debit balance - balance sheet - permanent - asset
Close out all revenue and expense accounts into retained earnings.
prepare Unadjusted trial balance
debit balance - balance sheet - permanent - asset

42. Accts on balance sheet
Assets - Liabilities - Equity
longterm liabilities
Net Income/Sales
debit balance - balance sheet - permanent - asset

43. Accumulated depriciation
Revenues-Expenses
prepare Unadjusted trial balance
Credit Balance - Balance Sheet - Permanent - owners equity
credit balance - balance sheet - permanent - liabilities

44. Monetary Unit
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
determine the direction of the effect. debit or credit
how we measure - assumes economic mean
Net Income/Sales

45. Relevance
Credit balance - Balance sheet and Retained Earnings - Permanent
similar to unearned revenue- liabilities
an appraised value for land gives additional information that is useful to investors
Debit Balance - Retained Earnings - Temporary - Owners Equity

46. 1st step of Accounting Cycle
analyze transactions from external events
(cash - accts revievable - inventory) turn into cash within 12 months
an appraised value for land gives additional information that is useful to investors
Debit Balance - Retained Earnings - Temporary - Owners Equity

47. Income Satement Expenses
Debit Balance - Income Statement - Temporary - expense
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
prepar journal to general ledger
Credit balance - Balance sheet and Retained Earnings - Permanent

48. Unearned revenue
credit balance - balance sheet - permanent - liabilities
does the equation remain in balance?
prepare post-closing trial balance
prepare Unadjusted trial balance

49. Interest Expense
debit balance - Balance sheet - permanent - asset
Debit Balance - Income Statement - temporary - Expense
debit balance - Balance sheet - Permanent - asset
copyright - long term assets - noncurrent

50. Economic Equity
longterm liabilities
prepare closing entry-post to general ledger
each owner has its own books - records - financial statements that are seperate.
determine the direction of the effect. debit or credit