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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. 8th step of Accounting Cycle
Current Assets/Current Liabilities
Revenues and Expenses
debit balance - Balance sheet - Permanent - asset
prepare financial statements

2. Calculating Interest Formula
Debit Balance - Income Statement - Temporary - expense
Net Income/Sales
Payment x Rate x Time
debit balance - income statement - temporary - expense

3. Prepaid insurance
Contributed Capital - Retained Earnings - Dividends
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
debit balance - balance sheet - permanent - asset
post journal to general ledger

4. 2nd step of analyzing transactions
prepare Unadjusted trial balance
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
analyze transactions from external events
each owner has its own books - records - financial statements that are seperate.

5. Profit Margin %
Net Income/Sales
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Assets - Liabilities - Equity
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

6. Accounts Recievable
cost-salvage value/years of life
Debit Balance - Balance sheet - permanent - asset
Current Assets/Current Liabilities
(long-term) assets (building - land - equipment)

7. 5th step of Accounting Cycle
record adjusting entries to general journal
(long-term) assets (building - land - equipment)
Debit Balance - Balance sheet - permanent - asset
credit balance - balance sheet - permanent - liabilities

8. 1st Step of Analying Transactions
Identify Accounts affected
prepare Unadjusted trial balance
does the equation remain in balance?
record adjusting entries to general journal

9. Inventory
Close out all revenue and expense accounts into retained earnings.
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
prepare adjusted trial balance
debit balance - Balance sheet - permanent - asset

10. Unearned revenue
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
debit balance - income statement - temporary - expense
credit balance - balance sheet - permanent - liabilities

11. Note Payable
Debit Balance - Income Statement - Temporary - expense
Assets - Liabilities - Equity
Credit Balance - Balance Sheet - permanent - liability
decrease equity - debit balance

12. 9th step of Accounting Cycle
credit balance - balance sheet - permanent - 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.
to those willing to take time to understand it
prepare closing entry-post to general ledger

13. Going Concern
record adjusting entries to general journal
Debit Balance - Balance sheet - permanent - asset
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Current Assets/Current Liabilities

14. Understandability
Credit Balance - Balance Sheet - permanent - liability
Debit Balance - Balance sheet - permanent - asset
to those willing to take time to understand it
Revenues and Expenses

15. Balance Sheet Liabilities
debit balance - Balance sheet - Permanent - asset
a company uses the same method each year for calculating inventory
wages payable - utilities payable - interest payable - unearned revenue - note payable
Credit balance - income statement - temporary - revenues

16. Reliability
Debit Balance - Income Statement - temporary - Expense
similar to unearned revenue- liabilities
prepare financial statements
the original amount to purchase land is verifiable through the contract documents

17. Closing Entries
Debit Balance - Balance sheet - permanent - asset
Close out all revenue and expense accounts into retained earnings.
a company uses the same method each year for calculating inventory
Debit Balance - Income Statement - temporary - Expense

18. 1st step of Accounting Cycle
analyze transactions from external events
prepare Unadjusted trial balance
decrease equity - debit balance
Payment x Rate x Time

19. 4th 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.
prepare Unadjusted trial balance
post journal to general ledger
Close out all revenue and expense accounts into retained earnings.

20. Accumulated depriciation
wages payable - utilities payable - interest payable - unearned revenue - note payable
determine the direction of the effect. debit or credit
Debit Balance - Retained Earnings - Temporary - Owners Equity
credit balance - balance sheet - permanent - liabilities

21. 7th step of Accounting Cycle
prepare post-closing trial balance
post journal to general ledger
prepare adjusted trial balance
Credit Balance - Balance Sheet - permanent - liability

22. Goodwill
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
debit balance - balance sheet - permanent - asset
Debit Balance - Income Statement - Temporary - expense
wages payable - utilities payable - interest payable - unearned revenue - note payable

23. Calculating Net Income
does the equation remain in balance?
prepare financial statements
Net Income/Sales
Revenues-Expenses

24. Utilities expense
prepar journal to general ledger
debit balance - income statement - temporary - expense
credit balance - income statement - temporary - Revenue
copyright - long term assets - noncurrent

25. Retained Earnings
debit balance - balance sheet - permanent - asset
Close out all revenue and expense accounts into retained earnings.
Credit balance - Balance sheet and Retained Earnings - Permanent
(long-term) assets (building - land - equipment)

26. Balance Sheet Assets
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
prepare financial statements
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
analyze transactions from external events

27. Current Assets
prepare post-closing trial balance
to those willing to take time to understand it
Debit Balance - Income Statement - Temporary - expense
(cash - accts revievable - inventory) turn into cash within 12 months

28. Economic Equity
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
debit balance - balance sheet - permanent - asset
Retained earnings beg. balance - Net income - dividends.
each owner has its own books - records - financial statements that are seperate.

29. 3rd step of Accounting Cycle
Assets - Liabilities - Equity
prepar journal to general ledger
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Debit Balance - Income Statement - temporary - Expense

30. Calculating Cost depreciation
cost-salvage value/years of life
credit balance - balance sheet - permanent - liabilities
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

31. Multistep Income Statement
Contra Asset - noncurrent asset
copyright - long term assets - noncurrent
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
each owner has its own books - records - financial statements that are seperate.

32. Interest Revenue
(cash - accts revievable - inventory) turn into cash within 12 months
copyright - long term assets - noncurrent
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Credit balance - income statement - temporary - revenues

33. Income Statement Revenues
credit balance - balance sheet - permanent - liabilities
Sales Revenues
each owner has its own books - records - financial statements that are seperate.
prepare Unadjusted trial balance

34. Sales revenue
credit balance - income statement - temporary - Revenue
Debit Balance - Balance sheet - permanent - asset
Contra Asset - noncurrent asset
cost-salvage value/years of life

35. Consistency
analyze transactions from external events
Debit Balance - Balance sheet - permanent - asset
a company uses the same method each year for calculating inventory
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

36. Accounting Equation
wages payable - utilities payable - interest payable - unearned revenue - note payable
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Credit balance - Balance sheet and Retained Earnings - Permanent
Credit Balance - Balance Sheet - permanent - liability

37. Conservatism
debit balance - balance sheet - permanent - asset
prepare Unadjusted trial balance
the original amount to purchase land is verifiable through the contract documents
companies must reduce the value of land - if the value is lower than its original cost.

38. 6th step of Accounting Cycle
post journal to general ledger
similar to unearned revenue- liabilities
determine the direction of the effect. debit or credit
prepare Unadjusted trial balance

39. Cost of Goods Sold
Debit Balance - Income Statement - Temporary - expense
Current Assets/Current Liabilities
prepare closing entry-post to general ledger
credit balance - balance sheet - permanent - liabilities

40. Common Stock
Credit balance - Balance sheet and Retained Earnings - Permanent
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
companies must reduce the value of land - if the value is lower than its original cost.
Credit Balance - Balance Sheet - Permanent - owners equity

41. Dividends
determine the direction of the effect. debit or credit
debit balance - balance sheet - permanent - asset
(cash - accts revievable - inventory) turn into cash within 12 months
Debit Balance - Retained Earnings - Temporary - Owners Equity

42. Customer deposits
credit balance - balance sheet - permanent - liabilities
Debit Balance - Balance sheet - permanent - asset
similar to unearned revenue- liabilities
post journal to general ledger

43. Accts on balance sheet
Assets - Liabilities - Equity
post journal to general ledger
Credit Balance - Balance Sheet - Permanent - owners equity
(long-term) assets (building - land - equipment)

44. Current Ratio
Current Assets/Current Liabilities
similar to unearned revenue- liabilities
record transactions in general journal
Revenues and Expenses

45. NonCurrent Assets
Identify Accounts affected
(long-term) assets (building - land - equipment)
Net Income/Sales
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

46. Relevance
an appraised value for land gives additional information that is useful to investors
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Net Income/Sales
longterm liabilities

47. Materiality

48. Cash Principle
credit balance - balance sheet - permanent - liabilities
an appraised value for land gives additional information that is useful to investors
Contributed Capital - Retained Earnings - Dividends
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

49. Dividends
analyze transactions from external events
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
Contra Asset - noncurrent asset
decrease equity - debit balance

50. Balance sheet Equity
Contributed Capital - Retained Earnings - Dividends
Credit Balance - Balance Sheet - permanent - liability
Retained earnings beg. balance - Net income - dividends.
similar to unearned revenue- liabilities