Test your basic knowledge |

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. Current Assets
debit balance - income statement - temporary - expense
record adjusting entries to general journal
(cash - accts revievable - inventory) turn into cash within 12 months
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

2. Dividends
Assets - Liabilities - Equity
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Debit Balance - Retained Earnings - Temporary - Owners Equity
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income

3. NonCurrent Assets
(cash - accts revievable - inventory) turn into cash within 12 months
longterm liabilities
prepare Unadjusted trial balance
(long-term) assets (building - land - equipment)

4. 8th step of Accounting Cycle
Contra Asset - noncurrent asset
prepare financial statements
to those willing to take time to understand it
Net Income/Sales

5. Utilities expense
credit balance - balance sheet - permanent - liabilities
does the equation remain in balance?
debit balance - Balance sheet - Permanent - asset
debit balance - income statement - temporary - expense

6. Reliability
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
a company uses the same method each year for calculating inventory
credit balance - balance sheet - permanent - liabilities
the original amount to purchase land is verifiable through the contract documents

7. Income Satement Expenses
(long-term) assets (building - land - equipment)
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
post journal to general ledger
longterm liabilities

8. Common Stock
Contra Asset - noncurrent asset
Credit Balance - Balance Sheet - Permanent - owners equity
Credit Balance - Balance Sheet - permanent - liability
prepare financial statements

9. Interest Expense
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Revenues-Expenses
Debit Balance - Income Statement - temporary - Expense
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

10. Intangibles
Revenues-Expenses
does the equation remain in balance?
credit balance - income statement - temporary - Revenue
copyright - long term assets - noncurrent

11. Materiality

12. Balance sheet Equity
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
Contributed Capital - Retained Earnings - Dividends
prepare Unadjusted trial balance

13. Monetary Unit
Debit Balance - Retained Earnings - Temporary - Owners Equity
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.
how we measure - assumes economic mean

14. 10th step of Accounting Cycle
prepare post-closing trial balance
longterm liabilities
prepar journal to general ledger
debit balance - Balance sheet - Permanent - asset

15. 9th step of Accounting Cycle
Credit Balance - Balance Sheet - permanent - liability
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
debit balance - balance sheet - permanent - asset
prepare closing entry-post to general ledger

16. Dividends
decrease equity - debit balance
prepare Unadjusted trial balance
each owner has its own books - records - financial statements that are seperate.
determine the direction of the effect. debit or credit

17. Cost of Goods Sold
decrease equity - debit balance
record transactions in general journal
(long-term) assets (building - land - equipment)
Debit Balance - Income Statement - Temporary - expense

18. Profit Margin %
Debit Balance - Income Statement - Temporary - expense
Net Income/Sales
Assets - Liabilities - Equity
record transactions in general journal

19. Unearned revenue
Debit Balance - Retained Earnings - Temporary - Owners Equity
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - 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.

20. 3rd step of Accounting Cycle
Debit Balance - Income Statement - temporary - Expense
post journal to general ledger
prepar journal to general ledger
credit balance - balance sheet - permanent - liabilities

21. 2nd step of Accounting Cycle
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
credit balance - income statement - temporary - Revenue
an appraised value for land gives additional information that is useful to investors
record transactions in general journal

22. Relevance
prepare Unadjusted trial balance
debit balance - Balance sheet - Permanent - asset
Contra Asset - noncurrent asset
an appraised value for land gives additional information that is useful to investors

23. 6th step of Accounting Cycle
to those willing to take time to understand it
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
post journal to general ledger
analyze transactions from external events

24. Calculating Net Income
wages payable - utilities payable - interest payable - unearned revenue - note payable
Revenues-Expenses
debit balance - Balance sheet - Permanent - asset
Contributed Capital - Retained Earnings - Dividends

25. Accounts on Income Statement
Retained earnings beg. balance - Net income - dividends.
cost-salvage value/years of life
Revenues and Expenses
copyright - long term assets - noncurrent

26. Interest Revenue
record transactions in general journal
Credit balance - income statement - temporary - revenues
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Close out all revenue and expense accounts into retained earnings.

27. 1st step of Accounting Cycle
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
record transactions in general journal
analyze transactions from external events
Revenues-Expenses

28. 5th step of Accounting Cycle
credit balance - balance sheet - permanent - liabilities
record adjusting entries to general journal
debit balance - balance sheet - permanent - asset
longterm liabilities

29. Retained Earnings
Credit Balance - Balance Sheet - Permanent - owners equity
debit balance - income statement - temporary - expense
Credit balance - Balance sheet and Retained Earnings - Permanent
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

30. Closing Entries
does the equation remain in balance?
copyright - long term assets - noncurrent
Close out all revenue and expense accounts into retained earnings.
Debit Balance - Income Statement - Temporary - expense

31. Accumlated depreciation
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
Contra Asset - noncurrent asset
cost-salvage value/years of life
the original amount to purchase land is verifiable through the contract documents

32. Accumulated depriciation
prepare Unadjusted trial balance
Net Income/Sales
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
credit balance - balance sheet - permanent - liabilities

33. Calculating Interest Formula
Assets - Liabilities - Equity
companies must reduce the value of land - if the value is lower than its original cost.
debit balance - balance sheet - permanent - asset
Payment x Rate x Time

34. Customer deposits
Credit Balance - Balance Sheet - Permanent - owners equity
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
similar to unearned revenue- liabilities
Debit Balance - Balance sheet - permanent - asset

35. Cash Principle
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.
debit balance - balance sheet - permanent - asset
credit balance - balance sheet - permanent - liabilities

36. Understandability
record adjusting entries to general journal
to those willing to take time to understand it
Debit Balance - Retained Earnings - Temporary - Owners Equity
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. Balance Sheet Assets
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Assets - Liabilities - Equity
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
how we measure - assumes economic mean

38. NonCurrent Liabilities
longterm liabilities
debit balance - Balance sheet - Permanent - asset
the original amount to purchase land is verifiable through the contract documents
Sales Revenues

39. 7th step of Accounting Cycle
determine the direction of the effect. debit or credit
debit balance - Balance sheet - permanent - asset
debit balance - Balance sheet - Permanent - asset
prepare adjusted trial balance

40. Prepaid insurance
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
Net Income/Sales
credit balance - income statement - temporary - Revenue

41. Conservatism
Sales Revenues
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
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

42. Accounting Equation
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Contra Asset - noncurrent asset
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

43. 4th step of Accounting Cycle
Current Assets/Current Liabilities
analyze transactions from external events
prepare Unadjusted trial balance
debit balance - income statement - temporary - expense

44. Building
longterm liabilities
debit balance - Balance sheet - Permanent - asset
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
credit balance - balance sheet - permanent - liabilities

45. Inventory
debit balance - Balance sheet - permanent - asset
Contra Asset - noncurrent asset
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
record adjusting entries to general journal

46. Economic Equity
credit balance - balance sheet - permanent - liabilities
cost-salvage value/years of life
decrease equity - debit balance
each owner has its own books - records - financial statements that are seperate.

47. Income Statement Revenues
Sales Revenues
debit balance - Balance sheet - Permanent - asset
Payment x Rate x Time
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

48. Accounts Recievable
similar to unearned revenue- liabilities
Contributed Capital - Retained Earnings - Dividends
Debit Balance - Balance sheet - permanent - asset
the original amount to purchase land is verifiable through the contract documents

49. Goodwill
Revenues and Expenses
Current Assets/Current Liabilities
debit balance - balance sheet - permanent - asset
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

50. Going Concern
does the equation remain in balance?
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
debit balance - Balance sheet - Permanent - asset
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.