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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. Interest Revenue
Credit balance - income statement - temporary - revenues
cost-salvage value/years of life
debit balance - Balance sheet - Permanent - asset
Current Assets/Current Liabilities

2. 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 Revenues
Contributed Capital - Retained Earnings - Dividends
Assets - Liabilities - Equity

3. Accounts on Income Statement
record transactions in general journal
Credit Balance - Balance Sheet - permanent - liability
decrease equity - debit balance
Revenues and Expenses

4. Note Payable
Credit Balance - Balance Sheet - permanent - liability
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

5. Accounts Recievable
analyze transactions from external events
to those willing to take time to understand it
Debit Balance - Balance sheet - permanent - asset
debit balance - income statement - temporary - expense

6. Cost of Goods Sold
Assets - Liabilities - Equity
Debit Balance - Income Statement - Temporary - expense
how we measure - assumes economic mean
Net Income/Sales

7. Dividends
companies must reduce the value of land - if the value is lower than its original cost.
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
copyright - long term assets - noncurrent
Debit Balance - Retained Earnings - Temporary - Owners Equity

8. 1st Step of Analying Transactions
to those willing to take time to understand it
longterm liabilities
Identify Accounts affected
a company uses the same method each year for calculating inventory

9. NonCurrent Liabilities
longterm 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
(long-term) assets (building - land - equipment)

10. 2nd step of analyzing transactions
Credit Balance - Balance Sheet - permanent - liability
prepare Unadjusted trial balance
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

11. Accumlated depreciation
Contra Asset - noncurrent asset
Revenues-Expenses
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

12. Accts on balance sheet
Identify Accounts affected
Credit balance - Balance sheet and Retained Earnings - Permanent
longterm liabilities
Assets - Liabilities - Equity

13. Unearned revenue
each owner has its own books - records - financial statements that are seperate.
Payment x Rate x Time
debit balance - Balance sheet - Permanent - asset
credit balance - balance sheet - permanent - liabilities

14. 3rd step of Accounting Cycle
Current Assets/Current Liabilities
prepar journal to general ledger
(long-term) assets (building - land - equipment)
debit balance - income statement - temporary - expense

15. Inventory
debit balance - Balance sheet - permanent - asset
Identify Accounts affected
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

16. Building
prepare financial statements
Revenues and Expenses
debit balance - Balance sheet - Permanent - asset
prepare adjusted trial balance

17. Common Stock
companies must reduce the value of land - if the value is lower than its original cost.
Credit Balance - Balance Sheet - permanent - liability
how we measure - assumes economic mean
Credit Balance - Balance Sheet - Permanent - owners equity

18. Income Statement Revenues
to those willing to take time to understand it
decrease equity - debit balance
Sales Revenues
similar to unearned revenue- liabilities

19. Prepaid insurance
debit balance - balance sheet - permanent - asset
credit balance - income statement - temporary - Revenue
determine the direction of the effect. debit or credit
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

20. Reliability
the original amount to purchase land is verifiable through the contract documents
debit balance - income statement - temporary - expense
Retained earnings beg. balance - Net income - dividends.
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

21. Relevance
(cash - accts revievable - inventory) turn into cash within 12 months
to those willing to take time to understand it
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
an appraised value for land gives additional information that is useful to investors

22. 6th step of Accounting Cycle
Sales Revenues
prepare post-closing trial balance
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
post journal to general ledger

23. Accumulated depriciation
Sales Revenues
credit balance - balance sheet - permanent - liabilities
debit balance - Balance sheet - Permanent - asset
credit balance - income statement - temporary - Revenue

24. Current Ratio
record adjusting entries to general journal
Current Assets/Current Liabilities
debit balance - balance sheet - permanent - asset
Debit Balance - Income Statement - temporary - Expense

25. Consistency
a company uses the same method each year for calculating inventory
(cash - accts revievable - inventory) turn into cash within 12 months
debit balance - Balance sheet - permanent - asset
Net Income/Sales

26. 10th step of Accounting Cycle
prepare post-closing trial balance
Identify Accounts affected
to those willing to take time to understand it
companies must reduce the value of land - if the value is lower than its original cost.

27. Interest Expense
debit balance - balance sheet - permanent - asset
record transactions in general journal
Debit Balance - Income Statement - temporary - Expense
Assets - Liabilities - Equity

28. 3rd step of analyzing transactions
Contra Asset - noncurrent asset
a company uses the same method each year for calculating inventory
to those willing to take time to understand it
determine the direction of the effect. debit or credit

29. Conservatism
prepare post-closing trial balance
companies must reduce the value of land - if the value is lower than its original cost.
post journal to general ledger
credit balance - balance sheet - permanent - liabilities

30. Calculating Cost depreciation
debit balance - Balance sheet - permanent - asset
(cash - accts revievable - inventory) turn into cash within 12 months
cost-salvage value/years of life
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

31. Closing Entries
how we measure - assumes economic mean
Contra Asset - noncurrent asset
Close out all revenue and expense accounts into retained earnings.
a company uses the same method each year for calculating inventory

32. Balance Sheet Assets
Current Assets/Current Liabilities
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Sales Revenues
companies must reduce the value of land - if the value is lower than its original cost.

33. 2nd step of Accounting Cycle
prepare financial statements
record transactions in general journal
credit balance - balance sheet - permanent - liabilities
(cash - accts revievable - inventory) turn into cash within 12 months

34. 8th step of Accounting Cycle
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
prepare financial statements
Payment x Rate x Time
an appraised value for land gives additional information that is useful to investors

35. Intangibles
copyright - long term assets - noncurrent
debit balance - balance sheet - permanent - asset
each owner has its own books - records - financial statements that are seperate.
Identify Accounts affected

36. Materiality

37. Customer deposits
Revenues-Expenses
determine the direction of the effect. debit or credit
similar to unearned revenue- liabilities
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

38. Going Concern
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
each owner has its own books - records - financial statements that are seperate.
Payment x Rate x Time
debit balance - balance sheet - permanent - asset

39. Economic Equity
debit balance - balance sheet - permanent - asset
Credit Balance - Balance Sheet - Permanent - owners equity
each owner has its own books - records - financial statements that are seperate.
post journal to general ledger

40. Profit Margin %
Contributed Capital - Retained Earnings - Dividends
Retained earnings beg. balance - Net income - dividends.
an appraised value for land gives additional information that is useful to investors
Net Income/Sales

41. Multistep Income Statement
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
prepare closing entry-post to general ledger
analyze transactions from external events
Close out all revenue and expense accounts into retained earnings.

42. Monetary Unit
how we measure - assumes economic mean
Debit Balance - Income Statement - temporary - Expense
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

43. Goodwill
debit balance - balance sheet - permanent - asset
prepare adjusted trial balance
prepar journal to general ledger
decrease equity - debit balance

44. Accounting Equation
Revenues-Expenses
Credit Balance - Balance Sheet - Permanent - owners equity
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
debit balance - balance sheet - permanent - asset

45. Utilities expense
credit balance - balance sheet - permanent - liabilities
companies must reduce the value of land - if the value is lower than its original cost.
how we measure - assumes economic mean
debit balance - income statement - temporary - expense

46. 4th step of Accounting Cycle
prepare Unadjusted trial balance
Identify Accounts affected
each owner has its own books - records - financial statements that are seperate.
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

47. 5th step of Accounting Cycle
record adjusting entries to general journal
credit balance - balance sheet - permanent - liabilities
debit balance - balance sheet - permanent - asset
Credit Balance - Balance Sheet - permanent - liability

48. Dividends
Debit Balance - Retained Earnings - Temporary - Owners Equity
decrease equity - debit balance
Credit balance - Balance sheet and Retained Earnings - Permanent
Identify Accounts affected

49. 4th step of analyzing transactions
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
does the equation remain in balance?
Debit Balance - Income Statement - temporary - Expense
Contra Asset - noncurrent asset

50. Income Satement Expenses
Close out all revenue and expense accounts into retained earnings.
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
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