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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. Cost of Goods Sold
Identify Accounts affected
Debit Balance - Income Statement - Temporary - expense
Revenues-Expenses
the original amount to purchase land is verifiable through the contract documents

2. Building
an appraised value for land gives additional information that is useful to investors
debit balance - Balance sheet - Permanent - asset
each owner has its own books - records - financial statements that are seperate.
Identify Accounts affected

3. Relevance
debit balance - Balance sheet - Permanent - asset
companies must reduce the value of land - if the value is lower than its original cost.
Revenues and Expenses
an appraised value for land gives additional information that is useful to investors

4. 6th step of Accounting Cycle
post journal to general ledger
copyright - long term assets - noncurrent
Assets - Liabilities - Equity
similar to unearned revenue- liabilities

5. 4th step of analyzing transactions
does the equation remain in balance?
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
record transactions in general journal
each owner has its own books - records - financial statements that are seperate.

6. Retained Earnings
companies must reduce the value of land - if the value is lower than its original cost.
analyze transactions from external events
record adjusting entries to general journal
Credit balance - Balance sheet and Retained Earnings - Permanent

7. NonCurrent Liabilities
longterm liabilities
record transactions in general journal
Net Income/Sales
Credit balance - income statement - temporary - revenues

8. 9th step of Accounting Cycle
prepare closing entry-post to general ledger
cost-salvage value/years of life
Debit Balance - Income Statement - Temporary - expense
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

9. Accumulated depriciation
determine the direction of the effect. debit or credit
credit balance - balance sheet - permanent - liabilities
prepare financial statements
record adjusting entries to general journal

10. 5th step of Accounting Cycle
Close out all revenue and expense accounts into retained earnings.
record adjusting entries to general journal
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
credit balance - balance sheet - permanent - liabilities

11. Income Satement Expenses
record transactions in general journal
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
prepare adjusted trial balance
companies must reduce the value of land - if the value is lower than its original cost.

12. Cash Principle
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Retained earnings beg. balance - Net income - dividends.
Identify Accounts affected
credit balance - balance sheet - permanent - liabilities

13. Profit Margin %
Net Income/Sales
a company uses the same method each year for calculating inventory
longterm liabilities
companies must reduce the value of land - if the value is lower than its original cost.

14. Interest Revenue
Debit Balance - Balance sheet - permanent - asset
an appraised value for land gives additional information that is useful to investors
Credit balance - income statement - temporary - revenues
debit balance - income statement - temporary - expense

15. 4th step of Accounting Cycle
Current Assets/Current Liabilities
Payment x Rate x Time
prepare Unadjusted trial balance
Debit Balance - Balance sheet - permanent - asset

16. 2nd step of Accounting Cycle
record transactions in general journal
prepare closing entry-post to general ledger
prepare financial statements
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income

17. Interest Expense
Debit Balance - Income Statement - temporary - Expense
Debit Balance - Balance sheet - permanent - asset
Credit balance - Balance sheet and Retained Earnings - Permanent
credit balance - income statement - temporary - Revenue

18. Understandability
Net Income/Sales
Debit Balance - Income Statement - temporary - Expense
to those willing to take time to understand it
each owner has its own books - records - financial statements that are seperate.

19. Balance Sheet Assets
does the equation remain in balance?
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Revenues and Expenses
credit balance - balance sheet - permanent - liabilities

20. Materiality

21. Accumlated depreciation
prepare Unadjusted trial balance
Contra Asset - noncurrent asset
Revenues-Expenses
Contributed Capital - Retained Earnings - Dividends

22. Prepaid insurance
(cash - accts revievable - inventory) turn into cash within 12 months
Net Income/Sales
prepare financial statements
debit balance - balance sheet - permanent - asset

23. Goodwill
debit balance - balance sheet - permanent - asset
debit balance - income statement - temporary - expense
Assets - Liabilities - Equity
the original amount to purchase land is verifiable through the contract documents

24. Dividends
longterm liabilities
Payment x Rate x Time
Debit Balance - Retained Earnings - Temporary - Owners Equity
Contributed Capital - Retained Earnings - Dividends

25. 1st Step of Analying Transactions
Retained earnings beg. balance - Net income - dividends.
Identify Accounts affected
prepare adjusted trial balance
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

26. Utilities expense
debit balance - income statement - temporary - expense
Credit Balance - Balance Sheet - permanent - liability
Contra Asset - noncurrent asset
prepar journal to general ledger

27. Calculating Cost depreciation
Revenues-Expenses
record transactions in general journal
cost-salvage value/years of life
Payment x Rate x Time

28. Current Assets
decrease equity - debit balance
(cash - accts revievable - inventory) turn into cash within 12 months
each owner has its own books - records - financial statements that are seperate.
Revenues-Expenses

29. Monetary Unit
an appraised value for land gives additional information that is useful to investors
debit balance - balance sheet - permanent - asset
Credit Balance - Balance Sheet - permanent - liability
how we measure - assumes economic mean

30. Customer deposits
prepare Unadjusted trial balance
does the equation remain in balance?
similar to unearned revenue- liabilities
analyze transactions from external events

31. 10th step of Accounting Cycle
analyze transactions from external events
prepare post-closing trial balance
record transactions in general journal
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

32. Conservatism
Payment x Rate x Time
companies must reduce the value of land - if the value is lower than its original cost.
Debit Balance - Income Statement - Temporary - expense
to those willing to take time to understand it

33. Closing Entries
how we measure - assumes economic mean
wages payable - utilities payable - interest payable - unearned revenue - note payable
Revenues-Expenses
Close out all revenue and expense accounts into retained earnings.

34. Balance Sheet Liabilities
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
wages payable - utilities payable - interest payable - unearned revenue - note payable
Debit Balance - Balance sheet - permanent - asset
Net Income/Sales

35. Intangibles
Sales Revenues
Debit Balance - Retained Earnings - Temporary - Owners Equity
copyright - long term assets - noncurrent
debit balance - income statement - temporary - expense

36. NonCurrent Assets
copyright - long term assets - noncurrent
(long-term) assets (building - land - equipment)
Revenues and Expenses
Credit balance - Balance sheet and Retained Earnings - Permanent

37. Calculating Net Income
Revenues-Expenses
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
Current Assets/Current Liabilities

38. Note Payable
Credit Balance - Balance Sheet - permanent - liability
to those willing to take time to understand it
Debit Balance - Income Statement - temporary - Expense
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

39. Accts on balance sheet
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
Assets - Liabilities - Equity
Debit Balance - Retained Earnings - Temporary - Owners Equity
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

40. Accounting Equation
post journal to general ledger
Close out all revenue and expense accounts into retained earnings.
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
(cash - accts revievable - inventory) turn into cash within 12 months

41. 3rd step of analyzing transactions
Debit Balance - Income Statement - Temporary - expense
Identify Accounts affected
prepar journal to general ledger
determine the direction of the effect. debit or credit

42. Accounts on Income Statement
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
prepare adjusted trial balance
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
Revenues and Expenses

43. Income Statement Revenues
credit balance - balance sheet - permanent - liabilities
record transactions in general journal
Sales Revenues
cost-salvage value/years of life

44. 8th step of Accounting Cycle
credit balance - income statement - temporary - Revenue
prepare financial statements
post journal to general ledger
an appraised value for land gives additional information that is useful to investors

45. Current Ratio
(cash - accts revievable - inventory) turn into cash within 12 months
Current Assets/Current Liabilities
Net Income/Sales
debit balance - Balance sheet - permanent - asset

46. Sales revenue
longterm liabilities
the original amount to purchase land is verifiable through the contract documents
credit balance - income statement - temporary - Revenue
Sales Revenues

47. Accounts Recievable
companies must reduce the value of land - if the value is lower than its original cost.
Debit Balance - Balance sheet - permanent - asset
prepare post-closing trial balance
prepare financial statements

48. 2nd step of analyzing transactions
Assets - Liabilities - Equity
debit balance - Balance sheet - permanent - asset
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Debit Balance - Balance sheet - permanent - asset

49. Unearned revenue
Debit Balance - Income Statement - temporary - Expense
post journal to general ledger
credit balance - balance sheet - permanent - liabilities
prepare closing entry-post to general ledger

50. 7th step of Accounting Cycle
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
prepare adjusted trial balance
Payment x Rate x Time
to those willing to take time to understand it