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Business Accounting Basics

Instructions:

Answer 50 questions in 15 minutes.
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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. 7th step of Accounting Cycle
prepare adjusted trial balance
how we measure - assumes economic mean
prepar journal to general ledger
does the equation remain in balance?

2. 2nd step of analyzing transactions
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
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
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

3. 10th step of Accounting Cycle
analyze transactions from external events
copyright - long term assets - noncurrent
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
prepare post-closing trial balance

4. Economic Equity
(cash - accts revievable - inventory) turn into cash within 12 months
Credit balance - Balance sheet and Retained Earnings - Permanent
debit balance - income statement - temporary - expense
each owner has its own books - records - financial statements that are seperate.

5. Consistency
wages payable - utilities payable - interest payable - unearned revenue - note payable
Contributed Capital - Retained Earnings - Dividends
a company uses the same method each year for calculating inventory
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income

6. Accounts on Income Statement
record transactions in general journal
similar to unearned revenue- liabilities
a company uses the same method each year for calculating inventory
Revenues and Expenses

7. 3rd step of analyzing transactions
Assets - Liabilities - Equity
an appraised value for land gives additional information that is useful to investors
determine the direction of the effect. debit or credit
Current Assets/Current Liabilities

8. Understandability
prepare Unadjusted trial balance
prepare adjusted trial balance
to those willing to take time to understand it
debit balance - income statement - temporary - expense

9. Materiality

10. Note Payable
Credit Balance - Balance Sheet - permanent - liability
Contributed Capital - Retained Earnings - Dividends
cost-salvage value/years of life
Debit Balance - Income Statement - temporary - Expense

11. Income Statement Revenues
Contributed Capital - Retained Earnings - Dividends
Contra Asset - noncurrent asset
Sales Revenues
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

12. 4th step of Accounting Cycle
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Identify Accounts affected
Contra Asset - noncurrent asset
prepare Unadjusted trial balance

13. Conservatism
debit balance - balance sheet - permanent - asset
Revenues-Expenses
companies must reduce the value of land - if the value is lower than its original cost.
Credit Balance - Balance Sheet - permanent - liability

14. Accts on balance sheet
prepar journal to general ledger
Credit balance - Balance sheet and Retained Earnings - Permanent
a company uses the same method each year for calculating inventory
Assets - Liabilities - Equity

15. Going Concern
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
analyze transactions from external events
(long-term) assets (building - land - equipment)
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

16. Building
Credit balance - income statement - temporary - revenues
debit balance - Balance sheet - Permanent - asset
prepare Unadjusted trial balance
(long-term) assets (building - land - equipment)

17. Balance Sheet Assets
debit balance - income statement - temporary - expense
(cash - accts revievable - inventory) turn into cash within 12 months
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

18. Calculating Net Income
Debit Balance - Retained Earnings - Temporary - Owners Equity
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Current Assets/Current Liabilities
Revenues-Expenses

19. Cash Principle
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
record transactions in general journal
Assets - Liabilities - Equity
prepare financial statements

20. Cost of Goods Sold
Debit Balance - Income Statement - Temporary - expense
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
determine the direction of the effect. debit or credit
an appraised value for land gives additional information that is useful to investors

21. Accts on Statement of Retained Earnings
debit balance - balance sheet - permanent - asset
Retained earnings beg. balance - Net income - dividends.
prepare financial statements
Debit Balance - Income Statement - Temporary - expense

22. 1st Step of Analying Transactions
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
post journal to general ledger
Debit Balance - Income Statement - temporary - Expense

23. Accounting Equation
Debit Balance - Income Statement - Temporary - expense
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Payment x Rate x Time
does the equation remain in balance?

24. NonCurrent Assets
Credit balance - Balance sheet and Retained Earnings - Permanent
similar to unearned revenue- liabilities
prepare closing entry-post to general ledger
(long-term) assets (building - land - equipment)

25. Customer deposits
Contributed Capital - Retained Earnings - Dividends
Revenues and Expenses
similar to unearned revenue- liabilities
cost-salvage value/years of life

26. Calculating Interest Formula
Payment x Rate x Time
the original amount to purchase land is verifiable through the contract documents
Identify Accounts affected
Revenues-Expenses

27. 3rd step of Accounting Cycle
prepar journal to general ledger
Debit Balance - Income Statement - Temporary - expense
Credit balance - Balance sheet and Retained Earnings - Permanent
credit balance - balance sheet - permanent - liabilities

28. Monetary Unit
Net Income/Sales
how we measure - assumes economic mean
credit balance - balance sheet - permanent - liabilities
a company uses the same method each year for calculating inventory

29. Calculating Cost depreciation
prepare closing entry-post to general ledger
Contra Asset - noncurrent asset
cost-salvage value/years of life
similar to unearned revenue- liabilities

30. Balance sheet Equity
Debit Balance - Income Statement - Temporary - expense
Contributed Capital - Retained Earnings - Dividends
longterm liabilities
(cash - accts revievable - inventory) turn into cash within 12 months

31. Dividends
Revenues-Expenses
decrease equity - debit balance
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
(long-term) assets (building - land - equipment)

32. Dividends
Debit Balance - Retained Earnings - Temporary - Owners Equity
Debit Balance - Income Statement - Temporary - expense
Identify Accounts affected
prepare closing entry-post to general ledger

33. NonCurrent Liabilities
Contributed Capital - Retained Earnings - Dividends
a company uses the same method each year for calculating inventory
does the equation remain in balance?
longterm liabilities

34. Reliability
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
determine the direction of the effect. debit or credit
the original amount to purchase land is verifiable through the contract documents
prepare adjusted trial balance

35. 1st step of Accounting Cycle
analyze transactions from external events
record transactions in general journal
debit balance - balance sheet - permanent - asset
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

36. Relevance
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
an appraised value for land gives additional information that is useful to investors
cost-salvage value/years of life
Sales Revenues

37. 9th step of Accounting Cycle
prepare adjusted trial balance
companies must reduce the value of land - if the value is lower than its original cost.
prepare closing entry-post to general ledger
(long-term) assets (building - land - equipment)

38. Prepaid insurance
debit balance - balance sheet - permanent - asset
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
longterm liabilities
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income

39. Current Assets
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 - Income Statement - temporary - Expense
Credit Balance - Balance Sheet - permanent - liability
(cash - accts revievable - inventory) turn into cash within 12 months

40. Common Stock
Debit Balance - Income Statement - temporary - Expense
Credit Balance - Balance Sheet - Permanent - owners equity
analyze transactions from external events
debit balance - Balance sheet - permanent - asset

41. Balance Sheet Liabilities
how we measure - assumes economic mean
Close out all revenue and expense accounts into retained earnings.
wages payable - utilities payable - interest payable - unearned revenue - note payable
debit balance - Balance sheet - Permanent - asset

42. 4th step of analyzing transactions
to those willing to take time to understand it
Credit balance - income statement - temporary - revenues
prepare financial statements
does the equation remain in balance?

43. Current Ratio
debit balance - balance sheet - permanent - asset
credit balance - balance sheet - permanent - liabilities
Current Assets/Current Liabilities
Debit Balance - Retained Earnings - Temporary - Owners Equity

44. 6th step of Accounting Cycle
Debit Balance - Income Statement - temporary - Expense
decrease equity - debit balance
Assets - Liabilities - Equity
post journal to general ledger

45. Income Satement Expenses
credit balance - balance sheet - permanent - liabilities
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Sales Revenues
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

46. Unearned revenue
prepare closing entry-post to general ledger
wages payable - utilities payable - interest payable - unearned revenue - note payable
credit balance - balance sheet - permanent - liabilities
each owner has its own books - records - financial statements that are seperate.

47. Closing Entries
Revenues and Expenses
Close out all revenue and expense accounts into retained earnings.
Sales Revenues
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

48. Multistep Income Statement
debit balance - Balance sheet - permanent - asset
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
record transactions in general journal
Credit Balance - Balance Sheet - Permanent - owners equity

49. 5th step of Accounting Cycle
Revenues and Expenses
record adjusting entries to general journal
decrease equity - debit 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.

50. 2nd step of Accounting Cycle
record transactions in general journal
credit balance - income statement - temporary - Revenue
Identify Accounts affected
a company uses the same method each year for calculating inventory