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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. Consistency
a company uses the same method each year for calculating inventory
prepare Unadjusted trial balance
wages payable - utilities payable - interest payable - unearned revenue - note payable
debit balance - Balance sheet - Permanent - asset

2. Accts on balance sheet
prepare Unadjusted trial balance
credit balance - balance sheet - permanent - liabilities
Assets - Liabilities - Equity
record adjusting entries to general journal

3. Current Ratio
Current Assets/Current Liabilities
Revenues-Expenses
credit balance - balance sheet - permanent - liabilities
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

4. Dividends
analyze transactions from external events
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
Credit balance - Balance sheet and Retained Earnings - Permanent
Debit Balance - Retained Earnings - Temporary - Owners Equity

5. Conservatism
record transactions in general journal
companies must reduce the value of land - if the value is lower than its original cost.
Debit Balance - Income Statement - Temporary - expense
cost-salvage value/years of life

6. Economic Equity
an appraised value for land gives additional information that is useful to investors
Retained earnings beg. balance - Net income - dividends.
prepare closing entry-post to general ledger
each owner has its own books - records - financial statements that are seperate.

7. Inventory
prepare financial statements
Credit Balance - Balance Sheet - Permanent - owners equity
Revenues-Expenses
debit balance - Balance sheet - permanent - asset

8. Understandability
determine the direction of the effect. debit or credit
to those willing to take time to understand it
(cash - accts revievable - inventory) turn into cash within 12 months
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

9. 10th step of Accounting Cycle
Debit Balance - Retained Earnings - Temporary - Owners Equity
each owner has its own books - records - financial statements that are seperate.
prepare post-closing trial balance
credit balance - balance sheet - permanent - liabilities

10. Income Satement Expenses
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
record transactions in general journal
Credit Balance - Balance Sheet - permanent - liability

11. Going Concern
debit balance - Balance sheet - permanent - asset
Close out all revenue and expense accounts into retained earnings.
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
credit balance - balance sheet - permanent - liabilities

12. 2nd step of analyzing transactions
prepare post-closing trial balance
prepare adjusted trial balance
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
decrease equity - debit balance

13. Materiality
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
determine the direction of the effect. debit or credit
record adjusting entries to general journal
credit balance - income statement - temporary - Revenue

14. 1st Step of Analying Transactions
credit balance - balance sheet - permanent - liabilities
Close out all revenue and expense accounts into retained earnings.
companies must reduce the value of land - if the value is lower than its original cost.
Identify Accounts affected

15. 1st step of Accounting Cycle
analyze transactions from external events
(cash - accts revievable - inventory) turn into cash within 12 months
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
prepare financial statements

16. Building
debit balance - Balance sheet - Permanent - asset
record transactions in general journal
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

17. Retained Earnings
Credit balance - Balance sheet and Retained Earnings - Permanent
Sales Revenues
Contributed Capital - Retained Earnings - Dividends
Debit Balance - Retained Earnings - Temporary - Owners Equity

18. Balance Sheet Assets
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
prepar journal to general ledger
Assets - Liabilities - Equity
Credit Balance - Balance Sheet - permanent - liability

19. Multistep Income Statement
prepare closing entry-post 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
Net Income/Sales
Revenues-Expenses

20. 4th step of analyzing transactions
prepare Unadjusted trial balance
(long-term) assets (building - land - equipment)
does the equation remain in balance?
debit balance - balance sheet - permanent - asset

21. Note Payable
prepare Unadjusted trial balance
debit balance - income statement - temporary - expense
record adjusting entries to general journal
Credit Balance - Balance Sheet - permanent - liability

22. Closing Entries
similar to unearned revenue- liabilities
debit balance - Balance sheet - permanent - asset
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Close out all revenue and expense accounts into retained earnings.

23. Goodwill
record adjusting entries to general journal
debit balance - balance sheet - permanent - asset
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Net Income/Sales

24. Income Statement Revenues
Credit Balance - Balance Sheet - permanent - liability
Credit balance - Balance sheet and Retained Earnings - Permanent
Sales Revenues
debit balance - income statement - temporary - expense

25. Prepaid insurance
debit balance - balance sheet - permanent - asset
prepare Unadjusted trial balance
Retained earnings beg. balance - Net income - dividends.
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

26. 3rd step of analyzing transactions
Credit balance - Balance sheet and Retained Earnings - Permanent
Credit Balance - Balance Sheet - Permanent - owners equity
(long-term) assets (building - land - equipment)
determine the direction of the effect. debit or credit

27. NonCurrent Assets
similar to unearned revenue- liabilities
Close out all revenue and expense accounts into retained earnings.
(long-term) assets (building - land - equipment)
an appraised value for land gives additional information that is useful to investors

28. Calculating Net Income
copyright - long term assets - noncurrent
prepare financial statements
Credit Balance - Balance Sheet - Permanent - owners equity
Revenues-Expenses

29. Utilities expense
analyze transactions from external events
Retained earnings beg. balance - Net income - dividends.
debit balance - income statement - temporary - expense
determine the direction of the effect. debit or credit

30. Dividends
decrease equity - debit balance
prepar journal to general ledger
to those willing to take time to understand it
debit balance - Balance sheet - permanent - asset

31. Cost of Goods Sold
Debit Balance - Income Statement - Temporary - expense
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Retained earnings beg. balance - Net income - dividends.

32. Profit Margin %
Net Income/Sales
debit balance - Balance sheet - Permanent - asset
Current Assets/Current Liabilities
Close out all revenue and expense accounts into retained earnings.

33. 9th step of Accounting Cycle
post journal to general ledger
prepare closing entry-post to general ledger
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Identify Accounts affected

34. Cash Principle
prepare Unadjusted trial balance
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
credit balance - income statement - temporary - Revenue
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

35. Current Assets
a company uses the same method each year for calculating inventory
(cash - accts revievable - inventory) turn into cash within 12 months
Current Assets/Current Liabilities
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

36. Accounts Recievable
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
cost-salvage value/years of life

37. NonCurrent Liabilities
longterm liabilities
debit balance - balance sheet - permanent - asset
prepare closing entry-post to general ledger
Debit Balance - Balance sheet - permanent - asset

38. Accumulated depriciation
credit balance - balance sheet - permanent - liabilities
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
(cash - accts revievable - inventory) turn into cash within 12 months
debit balance - income statement - temporary - expense

39. 2nd step of Accounting Cycle
Credit Balance - Balance Sheet - Permanent - owners equity
record transactions in general journal
cost-salvage value/years of life
Net Income/Sales

40. Intangibles
Revenues and Expenses
copyright - long term assets - noncurrent
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
wages payable - utilities payable - interest payable - unearned revenue - note payable

41. Accts on Statement of Retained Earnings
prepare financial statements
credit balance - balance sheet - permanent - liabilities
Retained earnings beg. balance - Net income - dividends.
credit balance - balance sheet - permanent - liabilities

42. 5th step of Accounting Cycle
record adjusting entries to general journal
prepare financial statements
prepare closing entry-post to general ledger
Current Assets/Current Liabilities

43. Balance Sheet Liabilities
Debit Balance - Balance sheet - permanent - asset
a company uses the same method each year for calculating inventory
Revenues and Expenses
wages payable - utilities payable - interest payable - unearned revenue - note payable

44. Interest Revenue
prepare post-closing trial balance
Credit balance - income statement - temporary - revenues
Net Income/Sales
Payment x Rate x Time

45. Accounts on Income Statement
Revenues and Expenses
copyright - long term assets - noncurrent
prepare closing entry-post to general ledger
similar to unearned revenue- liabilities

46. Monetary Unit
(cash - accts revievable - inventory) turn into cash within 12 months
how we measure - assumes economic mean
cost-salvage value/years of life
determine the direction of the effect. debit or credit

47. Interest Expense
Debit Balance - Income Statement - temporary - Expense
Credit balance - income statement - temporary - revenues
prepare adjusted trial balance
Assets - Liabilities - Equity

48. Calculating Cost depreciation
cost-salvage value/years of life
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
debit balance - Balance sheet - permanent - asset
Revenues-Expenses

49. Customer deposits
prepar journal to general ledger
prepare Unadjusted trial balance
similar to unearned revenue- liabilities
record transactions in general journal

50. 3rd step of Accounting Cycle
to those willing to take time to understand it
Contributed Capital - Retained Earnings - Dividends
prepar journal to general ledger
credit balance - balance sheet - permanent - liabilities

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Business Accounting Basics

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