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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. NonCurrent Liabilities
a company uses the same method each year for calculating inventory
longterm liabilities
Credit balance - income statement - temporary - revenues
Current Assets/Current Liabilities

2. Income Satement Expenses
Revenues and Expenses
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
credit balance - balance sheet - permanent - liabilities
cost-salvage value/years of life

3. Relevance
debit balance - Balance sheet - permanent - asset
analyze transactions from external events
an appraised value for land gives additional information that is useful to investors
Net Income/Sales

4. Prepaid insurance
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Identify Accounts affected
debit balance - balance sheet - permanent - asset
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

5. Goodwill
analyze transactions from external events
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Contra Asset - noncurrent asset
debit balance - balance sheet - permanent - asset

6. 1st Step of Analying Transactions
Credit balance - income statement - temporary - revenues
Identify Accounts affected
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Revenues-Expenses

7. Current Ratio
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
to those willing to take time to understand it
record adjusting entries to general journal
Current Assets/Current Liabilities

8. Multistep Income Statement
Debit Balance - Retained Earnings - Temporary - Owners Equity
Debit Balance - Income Statement - temporary - Expense
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
Identify Accounts affected

9. Income Statement Revenues
Revenues and Expenses
Debit Balance - Income Statement - temporary - Expense
Sales Revenues
prepare financial statements

10. 1st step of Accounting Cycle
Debit Balance - Income Statement - temporary - Expense
prepare Unadjusted trial balance
analyze transactions from external events
copyright - long term assets - noncurrent

11. 2nd step of analyzing transactions
Revenues-Expenses
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
record transactions in general journal
prepare adjusted trial balance

12. Accts on Statement of Retained Earnings
prepare Unadjusted trial balance
Debit Balance - Income Statement - temporary - Expense
Retained earnings beg. balance - Net income - dividends.
Contributed Capital - Retained Earnings - Dividends

13. Monetary Unit
longterm liabilities
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
how we measure - assumes economic mean
debit balance - balance sheet - permanent - asset

14. 7th step of Accounting Cycle
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
prepare adjusted trial balance
Debit Balance - Retained Earnings - Temporary - Owners Equity

15. 2nd step of Accounting Cycle
analyze transactions from external events
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
record transactions in general journal
(long-term) assets (building - land - equipment)

16. 3rd step of Accounting Cycle
prepar journal to general ledger
each owner has its own books - records - financial statements that are seperate.
(cash - accts revievable - inventory) turn into cash within 12 months
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

17. Sales revenue
credit balance - income statement - temporary - Revenue
each owner has its own books - records - financial statements that are seperate.
similar to unearned revenue- liabilities
a company uses the same method each year for calculating inventory

18. Cash Principle
credit balance - income statement - temporary - Revenue
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
each owner has its own books - records - financial statements that are seperate.

19. Accts on balance sheet
Assets - Liabilities - Equity
copyright - long term assets - noncurrent
Credit Balance - Balance Sheet - permanent - liability
decrease equity - debit balance

20. 8th step of Accounting Cycle
Revenues-Expenses
Credit Balance - Balance Sheet - Permanent - owners equity
Net Income/Sales
prepare financial statements

21. Calculating Cost depreciation
record adjusting entries to general journal
Debit Balance - Balance sheet - permanent - asset
cost-salvage value/years of life
companies must reduce the value of land - if the value is lower than its original cost.

22. Cost of Goods Sold
Current Assets/Current Liabilities
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Revenues-Expenses
Debit Balance - Income Statement - Temporary - expense

23. Accumlated depreciation
Assets - Liabilities - Equity
how we measure - assumes economic mean
Debit Balance - Income Statement - Temporary - expense
Contra Asset - noncurrent asset

24. Balance sheet Equity
Contributed Capital - Retained Earnings - Dividends
copyright - long term assets - noncurrent
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Identify Accounts affected

25. Balance Sheet Liabilities
prepare Unadjusted trial balance
Current Assets/Current Liabilities
wages payable - utilities payable - interest payable - unearned revenue - note payable
prepare closing entry-post to general ledger

26. Building
Credit balance - Balance sheet and Retained Earnings - Permanent
analyze transactions from external events
the original amount to purchase land is verifiable through the contract documents
debit balance - Balance sheet - Permanent - asset

27. NonCurrent Assets
(long-term) assets (building - land - equipment)
Current Assets/Current Liabilities
copyright - long term assets - noncurrent
Debit Balance - Balance sheet - permanent - asset

28. 4th step of Accounting Cycle
Close out all revenue and expense accounts into retained earnings.
prepare Unadjusted trial balance
a company uses the same method each year for calculating inventory
debit balance - Balance sheet - Permanent - asset

29. Dividends
determine the direction of the effect. debit or credit
Assets - Liabilities - Equity
Debit Balance - Retained Earnings - Temporary - Owners Equity
credit balance - income statement - temporary - Revenue

30. 5th step of Accounting Cycle
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
Revenues-Expenses
record adjusting entries to general journal
Credit balance - income statement - temporary - revenues

31. Materiality

32. Note Payable
Credit Balance - Balance Sheet - permanent - liability
debit balance - balance sheet - permanent - asset
decrease equity - debit balance
each owner has its own books - records - financial statements that are seperate.

33. Current Assets
(cash - accts revievable - inventory) turn into cash within 12 months
(long-term) assets (building - land - equipment)
does the equation remain in balance?
credit balance - balance sheet - permanent - liabilities

34. 3rd step of analyzing transactions
(cash - accts revievable - inventory) turn into cash within 12 months
Revenues-Expenses
determine the direction of the effect. debit or credit
prepar journal to general ledger

35. Profit Margin %
Net Income/Sales
debit balance - balance sheet - permanent - asset
wages payable - utilities payable - interest payable - unearned revenue - note payable
Retained earnings beg. balance - Net income - dividends.

36. Unearned revenue
Revenues-Expenses
credit balance - balance sheet - permanent - liabilities
prepare adjusted trial balance
Debit Balance - Retained Earnings - Temporary - Owners Equity

37. Interest Expense
longterm liabilities
cost-salvage value/years of life
Debit Balance - Income Statement - temporary - Expense
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

38. Calculating Net Income
a company uses the same method each year for calculating inventory
does the equation remain in balance?
wages payable - utilities payable - interest payable - unearned revenue - note payable
Revenues-Expenses

39. 10th step of Accounting Cycle
Credit Balance - Balance Sheet - Permanent - owners equity
Credit balance - income statement - temporary - revenues
prepare post-closing trial balance
Debit Balance - Retained Earnings - Temporary - Owners Equity

40. Economic Equity
wages payable - utilities payable - interest payable - unearned revenue - note payable
each owner has its own books - records - financial statements that are seperate.
determine the direction of the effect. debit or credit
Assets - Liabilities - Equity

41. Dividends
Retained earnings beg. balance - Net income - dividends.
analyze transactions from external events
decrease equity - debit balance
Debit Balance - Balance sheet - permanent - asset

42. Accounts Recievable
wages payable - utilities payable - interest payable - unearned revenue - note payable
prepare adjusted trial balance
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

43. Reliability
the original amount to purchase land is verifiable through the contract documents
credit balance - balance sheet - permanent - liabilities
Revenues and Expenses
decrease equity - debit balance

44. Interest Revenue
Credit balance - income statement - temporary - revenues
debit balance - Balance sheet - Permanent - asset
wages payable - utilities payable - interest payable - unearned revenue - note payable
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

45. Going Concern
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
prepare Unadjusted trial balance
decrease equity - debit balance

46. Understandability
prepare Unadjusted trial balance
to those willing to take time to understand it
Retained earnings beg. balance - Net income - dividends.
Sales Revenues

47. Intangibles
Identify Accounts affected
analyze transactions from external events
Payment x Rate x Time
copyright - long term assets - noncurrent

48. Inventory
Debit Balance - Retained Earnings - Temporary - Owners Equity
Net Income/Sales
credit balance - income statement - temporary - Revenue
debit balance - Balance sheet - permanent - asset

49. Accumulated depriciation
(long-term) assets (building - land - equipment)
debit balance - Balance sheet - permanent - asset
credit balance - balance sheet - permanent - liabilities
Identify Accounts affected

50. Retained Earnings
Contributed Capital - Retained Earnings - Dividends
debit balance - Balance sheet - permanent - asset
Revenues-Expenses
Credit balance - Balance sheet and Retained Earnings - Permanent