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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. Relevance
Payment x Rate x Time
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
an appraised value for land gives additional information that is useful to investors

2. 3rd step of Accounting Cycle
analyze transactions from external events
prepar journal to general ledger
prepare adjusted trial balance
to those willing to take time to understand it

3. Calculating Cost depreciation
record adjusting entries to general journal
Sales Revenues
Identify Accounts affected
cost-salvage value/years of life

4. Consistency
a company uses the same method each year for calculating inventory
how we measure - assumes economic mean
Contra Asset - noncurrent asset
Credit Balance - Balance Sheet - permanent - liability

5. Reliability
Retained earnings beg. balance - Net income - dividends.
prepare Unadjusted trial balance
the original amount to purchase land is verifiable through the contract documents
Current Assets/Current Liabilities

6. 3rd step of analyzing transactions
Current Assets/Current Liabilities
determine the direction of the effect. debit or credit
Identify Accounts affected
Assets - Liabilities - Equity

7. NonCurrent Assets
credit balance - balance sheet - permanent - liabilities
Current Assets/Current Liabilities
Close out all revenue and expense accounts into retained earnings.
(long-term) assets (building - land - equipment)

8. 1st step of Accounting Cycle
debit balance - balance sheet - permanent - asset
copyright - long term assets - noncurrent
analyze transactions from external events
decrease equity - debit balance

9. Calculating Interest Formula
Payment x Rate x Time
does the equation remain in balance?
cost-salvage value/years of life
Credit balance - Balance sheet and Retained Earnings - Permanent

10. Prepaid insurance
an appraised value for land gives additional information that is useful to investors
debit balance - balance sheet - permanent - asset
Credit Balance - Balance Sheet - Permanent - owners equity
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

11. Accounts on Income Statement
does the equation remain in balance?
cost-salvage value/years of life
Close out all revenue and expense accounts into retained earnings.
Revenues and Expenses

12. Dividends
decrease equity - debit balance
prepare adjusted trial balance
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
debit balance - balance sheet - permanent - asset

13. 5th step of Accounting Cycle
Debit Balance - Balance sheet - permanent - asset
Credit balance - Balance sheet and Retained Earnings - Permanent
Revenues-Expenses
record adjusting entries to general journal

14. Accts on Statement of Retained Earnings
Payment x Rate x Time
Contributed Capital - Retained Earnings - Dividends
Retained earnings beg. balance - Net income - dividends.
cost-salvage value/years of life

15. Goodwill
prepar journal to general ledger
debit balance - balance sheet - permanent - asset
credit balance - balance sheet - permanent - liabilities
prepare adjusted trial balance

16. 10th step of Accounting Cycle
Current Assets/Current Liabilities
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
prepare post-closing trial balance

17. Accumulated depriciation
longterm liabilities
credit balance - balance sheet - permanent - liabilities
analyze transactions from external events
debit balance - balance sheet - permanent - asset

18. Interest Revenue
copyright - long term assets - noncurrent
Credit balance - income statement - temporary - revenues
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
companies must reduce the value of land - if the value is lower than its original cost.

19. Balance sheet Equity
debit balance - balance sheet - permanent - asset
debit balance - Balance sheet - Permanent - asset
Assets - Liabilities - Equity
Contributed Capital - Retained Earnings - Dividends

20. Cash Principle
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
wages payable - utilities payable - interest payable - unearned revenue - note payable
prepare post-closing trial balance

21. Inventory
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
decrease equity - debit balance
each owner has its own books - records - financial statements that are seperate.

22. 9th step of Accounting Cycle
prepare closing entry-post to general ledger
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
the original amount to purchase land is verifiable through the contract documents
Credit Balance - Balance Sheet - Permanent - owners equity

23. Going Concern
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
prepare closing entry-post to general ledger
credit balance - income statement - temporary - Revenue
Credit balance - Balance sheet and Retained Earnings - Permanent

24. Dividends
Debit Balance - Retained Earnings - Temporary - Owners Equity
(long-term) assets (building - land - equipment)
a company uses the same method each year for calculating inventory
Credit balance - Balance sheet and Retained Earnings - Permanent

25. 4th step of Accounting Cycle
prepare Unadjusted trial balance
Retained earnings beg. balance - Net income - dividends.
Identify Accounts affected
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

26. Calculating Net Income
Revenues-Expenses
prepare Unadjusted trial balance
Close out all revenue and expense accounts into retained earnings.
credit balance - balance sheet - permanent - liabilities

27. 4th step of analyzing transactions
does the equation remain in balance?
determine the direction of the effect. debit or credit
Close out all revenue and expense accounts into retained earnings.
how we measure - assumes economic mean

28. Economic Equity
record transactions in general journal
each owner has its own books - records - financial statements that are seperate.
prepare financial statements
Debit Balance - Retained Earnings - Temporary - Owners Equity

29. Balance Sheet Assets
a company uses the same method each year for calculating inventory
(long-term) assets (building - land - equipment)
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Credit balance - Balance sheet and Retained Earnings - Permanent

30. 8th step of Accounting Cycle
Contra Asset - noncurrent asset
prepare financial statements
record transactions in general journal
prepare adjusted trial balance

31. Accts on balance sheet
Assets - Liabilities - Equity
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
debit balance - balance sheet - permanent - asset
(cash - accts revievable - inventory) turn into cash within 12 months

32. Sales revenue
credit balance - income statement - temporary - Revenue
Current Assets/Current Liabilities
debit balance - balance sheet - permanent - asset
Close out all revenue and expense accounts into retained earnings.

33. 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
post journal to general ledger
Debit Balance - Retained Earnings - Temporary - Owners Equity

34. Cost of Goods Sold
Payment x Rate x Time
credit balance - balance sheet - permanent - liabilities
Debit Balance - Income Statement - Temporary - expense
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

35. Closing Entries
Sales Revenues
Payment x Rate x Time
Debit Balance - Income Statement - temporary - Expense
Close out all revenue and expense accounts into retained earnings.

36. Intangibles
prepare post-closing trial balance
copyright - long term assets - noncurrent
Payment x Rate x Time
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

37. Utilities expense
Close out all revenue and expense accounts into retained earnings.
debit balance - income statement - temporary - expense
credit balance - balance sheet - permanent - liabilities
debit balance - Balance sheet - permanent - asset

38. 7th step of Accounting Cycle
Contra Asset - noncurrent asset
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
prepare adjusted trial balance
prepare Unadjusted trial balance

39. Interest Expense
(cash - accts revievable - inventory) turn into cash within 12 months
Debit Balance - Income Statement - temporary - Expense
wages payable - utilities payable - interest payable - unearned revenue - note payable
a company uses the same method each year for calculating inventory

40. Conservatism
how we measure - assumes economic mean
Debit Balance - Income Statement - Temporary - expense
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.

41. Monetary Unit
(cash - accts revievable - inventory) turn into cash within 12 months
prepare Unadjusted trial balance
prepare adjusted trial balance
how we measure - assumes economic mean

42. Income Satement Expenses
Credit Balance - Balance Sheet - Permanent - owners equity
prepare financial statements
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
credit balance - balance sheet - permanent - liabilities

43. Retained Earnings
longterm liabilities
Credit balance - Balance sheet and Retained Earnings - Permanent
determine the direction of the effect. debit or credit
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

44. Unearned revenue
credit balance - balance sheet - permanent - liabilities
debit balance - balance sheet - permanent - asset
prepare closing entry-post 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.

45. 1st Step of Analying Transactions
Revenues and Expenses
Close out all revenue and expense accounts into retained earnings.
credit balance - balance sheet - permanent - liabilities
Identify Accounts affected

46. Profit Margin %
debit balance - balance sheet - permanent - asset
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Net Income/Sales
Assets - Liabilities - Equity

47. Multistep Income Statement
the original amount to purchase land is verifiable through the contract documents
wages payable - utilities payable - interest payable - unearned revenue - note payable
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income

48. Accounting Equation
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Contributed Capital - Retained Earnings - Dividends
Credit balance - Balance sheet and Retained Earnings - Permanent
how we measure - assumes economic mean

49. Current Assets
an appraised value for land gives additional information that is useful to investors
wages payable - utilities payable - interest payable - unearned revenue - note payable
(cash - accts revievable - inventory) turn into cash within 12 months
decrease equity - debit balance

50. Understandability
to those willing to take time to understand it
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
debit balance - income statement - temporary - expense
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments