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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. Balance sheet Equity
Close out all revenue and expense accounts into retained earnings.
record adjusting entries to general journal
does the equation remain in balance?
Contributed Capital - Retained Earnings - Dividends

2. Monetary Unit
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
analyze transactions from external events
how we measure - assumes economic mean
cost-salvage value/years of life

3. Economic Equity
Debit Balance - Balance sheet - permanent - asset
Contra Asset - noncurrent asset
Identify Accounts affected
each owner has its own books - records - financial statements that are seperate.

4. Unearned revenue
wages payable - utilities payable - interest payable - unearned revenue - note payable
prepare post-closing trial balance
credit balance - balance sheet - permanent - liabilities
companies must reduce the value of land - if the value is lower than its original cost.

5. Intangibles
debit balance - balance sheet - permanent - asset
Credit Balance - Balance Sheet - permanent - liability
prepare adjusted trial balance
copyright - long term assets - noncurrent

6. Understandability
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
Debit Balance - Income Statement - Temporary - expense
post journal to general ledger
to those willing to take time to understand it

7. Cost of Goods Sold
how we measure - assumes economic mean
(cash - accts revievable - inventory) turn into cash within 12 months
Debit Balance - Income Statement - Temporary - expense
the original amount to purchase land is verifiable through the contract documents

8. Cash Principle
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
the original amount to purchase land is verifiable through the contract documents
analyze transactions from external events
post journal to general ledger

9. 1st Step of Analying Transactions
does the equation remain in balance?
Net Income/Sales
cost-salvage value/years of life
Identify Accounts affected

10. Common Stock
Debit Balance - Income Statement - Temporary - expense
does the equation remain in balance?
Contra Asset - noncurrent asset
Credit Balance - Balance Sheet - Permanent - owners equity

11. NonCurrent Liabilities
longterm liabilities
(cash - accts revievable - inventory) turn into cash within 12 months
Credit balance - Balance sheet and Retained Earnings - Permanent
prepar journal to general ledger

12. Profit Margin %
Net Income/Sales
to those willing to take time to understand it
Revenues and Expenses
Debit Balance - Income Statement - temporary - Expense

13. Inventory
debit balance - Balance sheet - permanent - asset
prepar journal to general ledger
credit balance - income statement - temporary - Revenue
does the equation remain in balance?

14. 6th step of Accounting Cycle
Sales Revenues
Revenues-Expenses
post journal to general ledger
an appraised value for land gives additional information that is useful to investors

15. Accounts on Income Statement
a company uses the same method each year for calculating inventory
Revenues and Expenses
Revenues-Expenses
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

16. Interest Expense
Sales Revenues
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
debit balance - balance sheet - permanent - asset
Debit Balance - Income Statement - temporary - Expense

17. Calculating Net Income
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
Revenues-Expenses
Revenues and Expenses

18. 2nd step of Accounting Cycle
Current Assets/Current Liabilities
record adjusting entries to general journal
record transactions in general journal
credit balance - balance sheet - permanent - liabilities

19. Prepaid insurance
prepare post-closing trial balance
debit balance - balance sheet - permanent - asset
prepare financial statements
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

20. 4th step of analyzing transactions
Credit Balance - Balance Sheet - Permanent - owners equity
Current Assets/Current Liabilities
Credit balance - Balance sheet and Retained Earnings - Permanent
does the equation remain in balance?

21. Calculating Interest Formula
determine the direction of the effect. debit or credit
Contra Asset - noncurrent asset
Payment x Rate x Time
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

22. Calculating Cost depreciation
cost-salvage value/years of life
analyze transactions from external events
Debit Balance - Retained Earnings - Temporary - Owners Equity
to those willing to take time to understand it

23. Interest Revenue
Credit balance - income statement - temporary - revenues
debit balance - Balance sheet - Permanent - asset
each owner has its own books - records - financial statements that are seperate.
prepare Unadjusted trial balance

24. Accounting Equation
Debit Balance - Income Statement - temporary - Expense
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
(long-term) assets (building - land - equipment)

25. Goodwill
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.
Debit Balance - Retained Earnings - Temporary - Owners Equity

26. 3rd step of analyzing transactions
Debit Balance - Retained Earnings - Temporary - Owners Equity
determine the direction of the effect. debit or credit
Retained earnings beg. balance - Net income - dividends.
Revenues-Expenses

27. Relevance
an appraised value for land gives additional information that is useful to investors
how we measure - assumes economic mean
credit balance - income statement - temporary - Revenue
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

28. 1st step of Accounting Cycle
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
analyze transactions from external events
Revenues and Expenses
does the equation remain in balance?

29. Balance Sheet Assets
record adjusting entries to general journal
Credit Balance - Balance Sheet - permanent - liability
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Debit Balance - Income Statement - temporary - Expense

30. Going Concern
Contra Asset - noncurrent asset
Debit Balance - Retained Earnings - Temporary - Owners Equity
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Assets - Liabilities - Equity

31. Income Satement Expenses
Revenues-Expenses
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Current Assets/Current Liabilities
debit balance - income statement - temporary - expense

32. Customer deposits
Sales Revenues
analyze transactions from external events
wages payable - utilities payable - interest payable - unearned revenue - note payable
similar to unearned revenue- liabilities

33. Retained Earnings
Net Income/Sales
Credit balance - Balance sheet and Retained Earnings - Permanent
record transactions in general journal
Credit Balance - Balance Sheet - Permanent - owners equity

34. 3rd step of Accounting Cycle
prepar journal to general ledger
Net Income/Sales
Contributed Capital - Retained Earnings - Dividends
prepare adjusted trial balance

35. Accumlated depreciation
Retained earnings beg. balance - Net income - dividends.
credit balance - balance sheet - permanent - liabilities
Contra Asset - noncurrent asset
Payment x Rate x Time

36. Note Payable
Credit Balance - Balance Sheet - permanent - liability
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Contributed Capital - Retained Earnings - Dividends
prepare adjusted trial balance

37. Consistency
determine the direction of the effect. debit or credit
a company uses the same method each year for calculating inventory
debit balance - income statement - temporary - expense
Debit Balance - Income Statement - Temporary - expense

38. 2nd step of analyzing transactions
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
cost-salvage value/years of life
wages payable - utilities payable - interest payable - unearned revenue - note payable
copyright - long term assets - noncurrent

39. 10th step of Accounting Cycle
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
copyright - long term assets - noncurrent
debit balance - Balance sheet - Permanent - asset
prepare post-closing trial balance

40. Balance Sheet Liabilities
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
Sales Revenues
wages payable - utilities payable - interest payable - unearned revenue - note payable
prepare financial statements

41. Utilities expense
Contra Asset - noncurrent asset
debit balance - income statement - temporary - expense
the original amount to purchase land is verifiable through the contract documents
debit balance - Balance sheet - permanent - asset

42. Accumulated depriciation
Revenues and Expenses
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.
Credit Balance - Balance Sheet - permanent - liability

43. Income Statement Revenues
does the equation remain in balance?
Sales Revenues
Credit Balance - Balance Sheet - permanent - liability
an appraised value for land gives additional information that is useful to investors

44. Dividends
Credit Balance - Balance Sheet - Permanent - owners equity
prepare closing entry-post to general ledger
Debit Balance - Retained Earnings - Temporary - Owners Equity
prepare adjusted trial balance

45. Building
post journal to general ledger
Sales Revenues
Revenues-Expenses
debit balance - Balance sheet - Permanent - asset

46. NonCurrent Assets
longterm liabilities
(cash - accts revievable - inventory) turn into cash within 12 months
companies must reduce the value of land - if the value is lower than its original cost.
(long-term) assets (building - land - equipment)

47. 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
Assets - Liabilities - Equity
Credit balance - income statement - temporary - revenues
decrease equity - debit balance

48. Current Ratio
similar to unearned revenue- liabilities
debit balance - Balance sheet - permanent - asset
Current Assets/Current Liabilities
prepare Unadjusted trial balance

49. 5th step of Accounting Cycle
Credit Balance - Balance Sheet - permanent - liability
Debit Balance - Income Statement - temporary - Expense
an appraised value for land gives additional information that is useful to investors
record adjusting entries to general journal

50. Accounts Recievable
Sales Revenues
Debit Balance - Balance sheet - permanent - asset
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
to those willing to take time to understand it