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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. Inventory
credit balance - income statement - temporary - Revenue
cost-salvage value/years of life
Sales Revenues
debit balance - Balance sheet - permanent - asset

2. Accts on Statement of Retained Earnings
Revenues and Expenses
Retained earnings beg. balance - Net income - dividends.
Contra Asset - noncurrent asset
debit balance - balance sheet - permanent - asset

3. Profit Margin %
determine the direction of the effect. debit or credit
Net Income/Sales
Revenues and Expenses
does the equation remain in balance?

4. Dividends
Payment x Rate x Time
an appraised value for land gives additional information that is useful to investors
decrease equity - debit balance
prepare closing entry-post to general ledger

5. Materiality

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6. 10th step of Accounting Cycle
prepare post-closing trial balance
credit balance - balance sheet - permanent - liabilities
Credit Balance - Balance Sheet - Permanent - owners equity
Credit Balance - Balance Sheet - permanent - liability

7. Interest Expense
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Payment x Rate x Time
an appraised value for land gives additional information that is useful to investors
Debit Balance - Income Statement - temporary - Expense

8. Calculating Interest Formula
companies must reduce the value of land - if the value is lower than its original cost.
Credit balance - Balance sheet and Retained Earnings - Permanent
Current Assets/Current Liabilities
Payment x Rate x Time

9. Calculating Cost depreciation
prepare post-closing trial balance
prepare Unadjusted trial balance
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
cost-salvage value/years of life

10. Cash Principle
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
a company uses the same method each year for calculating inventory
similar to unearned revenue- liabilities
Contra Asset - noncurrent asset

11. Dividends
Net Income/Sales
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Debit Balance - Retained Earnings - Temporary - Owners Equity
Contra Asset - noncurrent asset

12. 4th step of Accounting Cycle
Identify Accounts affected
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
debit balance - Balance sheet - Permanent - asset
prepare Unadjusted trial balance

13. Accounts on Income Statement
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Revenues and Expenses
determine the direction of the effect. debit or credit
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

14. 9th step of Accounting Cycle
prepare closing entry-post to general ledger
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
prepare adjusted trial balance
debit balance - Balance sheet - permanent - asset

15. 3rd step of Accounting Cycle
Debit Balance - Income Statement - temporary - Expense
Credit Balance - Balance Sheet - Permanent - owners equity
Current Assets/Current Liabilities
prepar journal to general ledger

16. Accounting Equation
prepare Unadjusted trial balance
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
record adjusting entries to general journal
prepare financial statements

17. Balance sheet Equity
prepare Unadjusted trial balance
Contributed Capital - Retained Earnings - Dividends
prepare post-closing trial balance
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

18. 5th step of Accounting Cycle
prepare post-closing trial balance
prepar journal to general ledger
record adjusting entries to general journal
Retained earnings beg. balance - Net income - dividends.

19. 2nd step of Accounting Cycle
record transactions in general journal
post journal to general ledger
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
(cash - accts revievable - inventory) turn into cash within 12 months

20. 1st Step of Analying Transactions
Identify Accounts affected
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Debit Balance - Income Statement - temporary - Expense
each owner has its own books - records - financial statements that are seperate.

21. Intangibles
copyright - long term assets - noncurrent
to those willing to take time to understand it
Current Assets/Current Liabilities
Assets - Liabilities - Equity

22. Income Satement Expenses
prepare adjusted trial balance
determine the direction of the effect. debit or credit
Credit Balance - Balance Sheet - permanent - liability
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

23. NonCurrent Assets
(long-term) assets (building - land - equipment)
Debit Balance - Income Statement - temporary - Expense
credit balance - balance sheet - permanent - liabilities
similar to unearned revenue- liabilities

24. Goodwill
a company uses the same method each year for calculating inventory
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
longterm liabilities
debit balance - balance sheet - permanent - asset

25. Understandability
does the equation remain in balance?
to those willing to take time to understand it
an appraised value for land gives additional information that is useful to investors
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

26. 2nd step of analyzing transactions
an appraised value for land gives additional information that is useful to investors
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
decrease equity - debit balance
a company uses the same method each year for calculating inventory

27. Building
debit balance - Balance sheet - Permanent - asset
copyright - long term assets - noncurrent
prepare post-closing trial balance
credit balance - balance sheet - permanent - liabilities

28. 4th step of analyzing transactions
does the equation remain in balance?
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
the original amount to purchase land is verifiable through the contract documents
credit balance - balance sheet - permanent - liabilities

29. Retained Earnings
Assets - Liabilities - Equity
analyze transactions from external events
record transactions in general journal
Credit balance - Balance sheet and Retained Earnings - Permanent

30. Current Assets
determine the direction of the effect. debit or credit
(cash - accts revievable - inventory) turn into cash within 12 months
Current Assets/Current Liabilities
Credit balance - Balance sheet and Retained Earnings - Permanent

31. Going Concern
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.
(long-term) assets (building - land - equipment)
the original amount to purchase land is verifiable through the contract documents

32. NonCurrent Liabilities
analyze transactions from external events
Credit balance - income statement - temporary - revenues
similar to unearned revenue- liabilities
longterm liabilities

33. Current Ratio
to those willing to take time to understand it
prepare Unadjusted trial balance
Current Assets/Current Liabilities
each owner has its own books - records - financial statements that are seperate.

34. Customer deposits
similar to unearned revenue- liabilities
an appraised value for land gives additional information that is useful to investors
the original amount to purchase land is verifiable through the contract documents
Credit balance - income statement - temporary - revenues

35. Reliability
Debit Balance - Income Statement - temporary - Expense
Credit Balance - Balance Sheet - Permanent - owners equity
Credit balance - Balance sheet and Retained Earnings - Permanent
the original amount to purchase land is verifiable through the contract documents

36. Accounts Recievable
record adjusting entries to general journal
Debit Balance - Balance sheet - permanent - asset
longterm liabilities
companies must reduce the value of land - if the value is lower than its original cost.

37. Accumlated depreciation
to those willing to take time to understand it
Close out all revenue and expense accounts into retained earnings.
Contra Asset - noncurrent asset
record adjusting entries to general journal

38. Unearned revenue
credit balance - balance sheet - permanent - liabilities
wages payable - utilities payable - interest payable - unearned revenue - note payable
determine the direction of the effect. debit or credit
post journal to general ledger

39. Accts on balance sheet
credit balance - income statement - temporary - Revenue
debit balance - income statement - temporary - expense
Assets - Liabilities - Equity
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

40. Sales revenue
Close out all revenue and expense accounts into retained earnings.
Debit Balance - Income Statement - Temporary - expense
credit balance - income statement - temporary - Revenue
Debit Balance - Balance sheet - permanent - asset

41. 8th step of Accounting Cycle
prepare financial statements
Contra Asset - noncurrent asset
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
copyright - long term assets - noncurrent

42. Balance Sheet Liabilities
an appraised value for land gives additional information that is useful to investors
wages payable - utilities payable - interest payable - unearned revenue - note payable
Debit Balance - Retained Earnings - Temporary - Owners Equity
Payment x Rate x Time

43. Balance Sheet Assets
to those willing to take time to understand it
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
wages payable - utilities payable - interest payable - unearned revenue - note payable
similar to unearned revenue- liabilities

44. Accumulated depriciation
credit balance - balance sheet - permanent - liabilities
Contributed Capital - Retained Earnings - Dividends
the original amount to purchase land is verifiable through the contract documents
Contra Asset - noncurrent asset

45. Prepaid insurance
decrease equity - debit balance
debit balance - balance sheet - permanent - asset
Debit Balance - Retained Earnings - Temporary - Owners Equity
how we measure - assumes economic mean

46. Multistep Income Statement
a company uses the same method each year for calculating inventory
Credit Balance - Balance Sheet - permanent - liability
cost-salvage value/years of life
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income

47. Cost of Goods Sold
a company uses the same method each year for calculating inventory
Debit Balance - Income Statement - Temporary - expense
Retained earnings beg. balance - Net income - dividends.
prepare adjusted trial balance

48. 6th step of Accounting Cycle
Retained earnings beg. balance - Net income - dividends.
Debit Balance - Retained Earnings - Temporary - Owners Equity
post journal to general ledger
prepare Unadjusted trial balance

49. Income Statement Revenues
Sales Revenues
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
Identify Accounts affected
Retained earnings beg. balance - Net income - dividends.

50. Economic Equity
(cash - accts revievable - inventory) turn into cash within 12 months
each owner has its own books - records - financial statements that are seperate.
prepar journal to general ledger
(long-term) assets (building - land - equipment)