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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. 2nd step of analyzing transactions
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
companies must reduce the value of land - if the value is lower than its original cost.
Revenues-Expenses
cost-salvage value/years of life

2. Building
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
prepare closing entry-post to general ledger
debit balance - Balance sheet - Permanent - asset
cost-salvage value/years of life

3. Conservatism
Credit Balance - Balance Sheet - Permanent - owners equity
credit balance - balance sheet - permanent - liabilities
companies must reduce the value of land - if the value is lower than its original cost.
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

4. 3rd step of Accounting Cycle
Debit Balance - Income Statement - temporary - Expense
prepar journal to general ledger
(cash - accts revievable - inventory) turn into cash within 12 months
debit balance - balance sheet - permanent - asset

5. 4th step of analyzing transactions
Revenues and Expenses
credit balance - balance sheet - permanent - liabilities
(cash - accts revievable - inventory) turn into cash within 12 months
does the equation remain in balance?

6. Inventory
debit balance - Balance sheet - permanent - asset
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 - liabilities

7. Accts on balance sheet
an appraised value for land gives additional information that is useful to investors
Assets - Liabilities - Equity
Debit Balance - Income Statement - temporary - Expense
Revenues-Expenses

8. Economic Equity
determine the direction of the effect. debit or credit
each owner has its own books - records - financial statements that are seperate.
cost-salvage value/years of life
prepare adjusted trial balance

9. Current Ratio
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Assets - Liabilities - Equity
Current Assets/Current Liabilities
wages payable - utilities payable - interest payable - unearned revenue - note payable

10. Retained Earnings
Contributed Capital - Retained Earnings - Dividends
Credit balance - Balance sheet and Retained Earnings - Permanent
debit balance - balance sheet - permanent - asset
credit balance - balance sheet - permanent - liabilities

11. Dividends
debit balance - Balance sheet - permanent - asset
credit balance - income statement - temporary - Revenue
Contra Asset - noncurrent asset
decrease equity - debit balance

12. Cash Principle
decrease equity - debit balance
Credit Balance - Balance Sheet - permanent - liability
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.

13. Understandability
prepare adjusted trial balance
to those willing to take time to understand it
Debit Balance - Income Statement - Temporary - expense
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

14. Interest Expense
the original amount to purchase land is verifiable through the contract documents
Debit Balance - Income Statement - temporary - Expense
Payment x Rate x Time
prepare adjusted trial balance

15. Accumulated depriciation
Assets - Liabilities - Equity
does the equation remain in balance?
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.

16. Unearned revenue
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
credit balance - balance sheet - permanent - liabilities
similar to unearned revenue- 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.

17. Balance Sheet Liabilities
Net Income/Sales
Debit Balance - Income Statement - Temporary - expense
Contra Asset - noncurrent asset
wages payable - utilities payable - interest payable - unearned revenue - note payable

18. Multistep Income Statement
Identify Accounts affected
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 - Retained Earnings - Temporary - Owners Equity

19. Calculating Cost depreciation
debit balance - balance sheet - permanent - asset
record transactions in general journal
cost-salvage value/years of life
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

20. Income Satement Expenses
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
prepare post-closing trial balance
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Retained earnings beg. balance - Net income - dividends.

21. Income Statement Revenues
(long-term) assets (building - land - equipment)
Debit Balance - Retained Earnings - Temporary - Owners Equity
Sales Revenues
similar to unearned revenue- liabilities

22. Balance sheet Equity
debit balance - balance sheet - permanent - asset
Contributed Capital - Retained Earnings - Dividends
wages payable - utilities payable - interest payable - unearned revenue - note payable
each owner has its own books - records - financial statements that are seperate.

23. 2nd step of Accounting Cycle
debit balance - balance sheet - permanent - asset
prepare closing entry-post to general ledger
Debit Balance - Income Statement - Temporary - expense
record transactions in general journal

24. Accounting Equation
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
similar to unearned revenue- liabilities
companies must reduce the value of land - if the value is lower than its original cost.
Sales Revenues

25. 1st step of Accounting Cycle
Assets - Liabilities - Equity
analyze transactions from external events
cost-salvage value/years of life
credit balance - balance sheet - permanent - liabilities

26. Calculating Net Income
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Revenues-Expenses
Revenues and Expenses
Debit Balance - Balance sheet - permanent - asset

27. Intangibles
(cash - accts revievable - inventory) turn into cash within 12 months
copyright - long term assets - noncurrent
Credit Balance - Balance Sheet - permanent - liability
Assets - Liabilities - Equity

28. Materiality

29. 5th step of Accounting Cycle
credit balance - income statement - temporary - Revenue
prepare Unadjusted trial balance
a company uses the same method each year for calculating inventory
record adjusting entries to general journal

30. Prepaid insurance
decrease equity - debit balance
prepare post-closing trial balance
Credit balance - Balance sheet and Retained Earnings - Permanent
debit balance - balance sheet - permanent - asset

31. Calculating Interest Formula
credit balance - income statement - temporary - Revenue
the original amount to purchase land is verifiable through the contract documents
Payment x Rate x Time
companies must reduce the value of land - if the value is lower than its original cost.

32. Current Assets
prepare closing entry-post to general ledger
(cash - accts revievable - inventory) turn into cash within 12 months
wages payable - utilities payable - interest payable - unearned revenue - note payable
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

33. 3rd step of analyzing transactions
determine the direction of the effect. debit or credit
debit balance - balance sheet - permanent - asset
each owner has its own books - records - financial statements that are seperate.
Credit Balance - Balance Sheet - permanent - liability

34. Customer deposits
Contributed Capital - Retained Earnings - Dividends
similar to unearned revenue- liabilities
record transactions in general journal
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. Sales revenue
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
credit balance - income statement - temporary - Revenue
longterm liabilities

36. Interest Revenue
Close out all revenue and expense accounts into retained earnings.
wages payable - utilities payable - interest payable - unearned revenue - note payable
Credit balance - income statement - temporary - revenues
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

37. Going Concern
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Sales Revenues
Credit balance - income statement - temporary - revenues
credit balance - income statement - temporary - Revenue

38. Balance Sheet Assets
post journal to general ledger
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
prepare closing entry-post to general ledger

39. 9th step of Accounting Cycle
prepare closing entry-post to general ledger
Debit Balance - Income Statement - Temporary - expense
credit balance - balance sheet - permanent - liabilities
determine the direction of the effect. debit or credit

40. Utilities expense
debit balance - income statement - temporary - expense
Credit Balance - Balance Sheet - Permanent - owners equity
Identify Accounts affected
Payment x Rate x Time

41. 1st Step of Analying Transactions
prepare adjusted trial balance
Identify Accounts affected
each owner has its own books - records - financial statements that are seperate.
prepare closing entry-post to general ledger

42. Note Payable
Credit Balance - Balance Sheet - permanent - liability
prepare financial statements
prepare closing entry-post to general ledger
determine the direction of the effect. debit or credit

43. Consistency
each owner has its own books - records - financial statements that are seperate.
a company uses the same method each year for calculating inventory
debit balance - income statement - temporary - expense
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

44. Reliability
the original amount to purchase land is verifiable through the contract documents
Net Income/Sales
Credit balance - income statement - temporary - revenues
(long-term) assets (building - land - equipment)

45. Relevance
prepar journal to general ledger
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
an appraised value for land gives additional information that is useful to investors
Assets - Liabilities - Equity

46. Accounts on Income Statement
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Credit Balance - Balance Sheet - permanent - liability
Credit balance - income statement - temporary - revenues
Revenues and Expenses

47. NonCurrent Assets
Credit balance - Balance sheet and Retained Earnings - Permanent
Retained earnings beg. balance - Net income - dividends.
(long-term) assets (building - land - equipment)
credit balance - balance sheet - permanent - liabilities

48. Goodwill
prepar journal to general ledger
debit balance - balance sheet - permanent - asset
Credit balance - income statement - temporary - revenues
Net Income/Sales

49. Accumlated depreciation
debit balance - income statement - temporary - expense
Contra Asset - noncurrent asset
record adjusting entries to general journal
an appraised value for land gives additional information that is useful to investors

50. 8th step of Accounting Cycle
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
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
prepare post-closing trial balance