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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. Balance sheet Equity
debit balance - Balance sheet - Permanent - asset
Contributed Capital - Retained Earnings - Dividends
Debit Balance - Income Statement - Temporary - expense
debit balance - income statement - temporary - expense

2. Accts on Statement of Retained Earnings
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
prepare post-closing trial balance
Retained earnings beg. balance - Net income - dividends.
credit balance - balance sheet - permanent - liabilities

3. Reliability
Credit Balance - Balance Sheet - Permanent - owners equity
the original amount to purchase land is verifiable through the contract documents
Debit Balance - Income Statement - temporary - Expense
how we measure - assumes economic mean

4. Cash Principle
analyze transactions from external events
prepare financial statements
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

5. 7th step of Accounting Cycle
prepare adjusted trial balance
Net Income/Sales
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Sales Revenues

6. Calculating Net Income
(long-term) assets (building - land - equipment)
prepare financial statements
Revenues-Expenses
each owner has its own books - records - financial statements that are seperate.

7. 2nd step of analyzing transactions
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Sales Revenues
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income

8. Accumlated depreciation
(cash - accts revievable - inventory) turn into cash within 12 months
Contra Asset - noncurrent asset
prepare Unadjusted trial balance
credit balance - balance sheet - permanent - liabilities

9. Calculating Cost depreciation
determine the direction of the effect. debit or credit
companies must reduce the value of land - if the value is lower than its original cost.
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

10. Interest Expense
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Assets - Liabilities - Equity
Debit Balance - Income Statement - temporary - Expense
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

11. 5th step of Accounting Cycle
(long-term) assets (building - land - equipment)
credit balance - balance sheet - permanent - liabilities
record adjusting entries to general journal
debit balance - balance sheet - permanent - asset

12. Economic Equity
each owner has its own books - records - financial statements that are seperate.
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Net Income/Sales
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

13. Sales revenue
prepare financial statements
Net Income/Sales
credit balance - income statement - temporary - Revenue
Credit Balance - Balance Sheet - Permanent - owners equity

14. Materiality

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15. Goodwill
Close out all revenue and expense accounts into retained earnings.
(cash - accts revievable - inventory) turn into cash within 12 months
debit balance - balance sheet - permanent - asset
prepare closing entry-post to general ledger

16. 3rd step of Accounting Cycle
prepare adjusted trial balance
copyright - long term assets - noncurrent
analyze transactions from external events
prepar journal to general ledger

17. Intangibles
a company uses the same method each year for calculating inventory
copyright - long term assets - noncurrent
prepare adjusted trial balance
Net Income/Sales

18. Accounts Recievable
the original amount to purchase land is verifiable through the contract documents
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
Contra Asset - noncurrent asset

19. Closing Entries
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>
Credit balance - income statement - temporary - revenues
Close out all revenue and expense accounts into retained earnings.

20. Monetary Unit
companies must reduce the value of land - if the value is lower than its original cost.
prepare closing entry-post to general ledger
how we measure - assumes economic mean
credit balance - balance sheet - permanent - liabilities

21. Utilities expense
debit balance - balance sheet - permanent - asset
each owner has its own books - records - financial statements that are seperate.
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.

22. Dividends
prepar journal to general ledger
each owner has its own books - records - financial statements that are seperate.
decrease equity - debit balance
Credit Balance - Balance Sheet - permanent - liability

23. Profit Margin %
Assets - Liabilities - Equity
Debit Balance - Income Statement - temporary - Expense
Debit Balance - Balance sheet - permanent - asset
Net Income/Sales

24. Current Ratio
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Close out all revenue and expense accounts into retained earnings.
Current Assets/Current Liabilities

25. Income Statement Revenues
prepare closing entry-post to general ledger
Sales Revenues
Credit Balance - Balance Sheet - Permanent - owners equity
record transactions in general journal

26. 2nd step of Accounting Cycle
prepare financial statements
determine the direction of the effect. debit or credit
Contra Asset - noncurrent asset
record transactions in general journal

27. 9th step of Accounting Cycle
Contributed Capital - Retained Earnings - Dividends
prepare closing entry-post to general ledger
a company uses the same method each year for calculating inventory
debit balance - income statement - temporary - expense

28. Cost of Goods Sold
each owner has its own books - records - financial statements that are seperate.
Net Income/Sales
wages payable - utilities payable - interest payable - unearned revenue - note payable
Debit Balance - Income Statement - Temporary - expense

29. 3rd step of analyzing transactions
credit balance - income statement - temporary - Revenue
determine the direction of the effect. debit or credit
Sales Revenues
Credit balance - Balance sheet and Retained Earnings - Permanent

30. Common Stock
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
prepar journal to general ledger
Credit Balance - Balance Sheet - Permanent - owners equity
Debit Balance - Balance sheet - permanent - asset

31. NonCurrent Assets
Debit Balance - Retained Earnings - Temporary - Owners Equity
an appraised value for land gives additional information that is useful to investors
(long-term) assets (building - land - equipment)
(cash - accts revievable - inventory) turn into cash within 12 months

32. Balance Sheet Liabilities
prepare post-closing trial balance
prepar journal to general ledger
wages payable - utilities payable - interest payable - unearned revenue - note payable
Retained earnings beg. balance - Net income - dividends.

33. Relevance
Revenues-Expenses
Identify Accounts affected
an appraised value for land gives additional information that is useful to investors
debit balance - income statement - temporary - expense

34. Customer deposits
record adjusting entries to general journal
record transactions in general journal
a company uses the same method each year for calculating inventory
similar to unearned revenue- liabilities

35. Accumulated depriciation
does the equation remain in balance?
credit balance - balance sheet - permanent - liabilities
debit balance - balance sheet - permanent - asset
Debit Balance - Retained Earnings - Temporary - Owners Equity

36. Unearned revenue
determine the direction of the effect. debit or credit
the original amount to purchase land is verifiable through the contract documents
prepare financial statements
credit balance - balance sheet - permanent - liabilities

37. 6th step of Accounting Cycle
Credit Balance - Balance Sheet - permanent - liability
cost-salvage value/years of life
post journal to general ledger
credit balance - income statement - temporary - Revenue

38. Conservatism
companies must reduce the value of land - if the value is lower than its original cost.
Credit balance - income statement - temporary - revenues
copyright - long term assets - noncurrent
Assets - Liabilities - Equity

39. 1st step of Accounting Cycle
Payment x Rate x Time
analyze transactions from external events
to those willing to take time to understand it
Assets - Liabilities - Equity

40. Building
debit balance - Balance sheet - Permanent - asset
(long-term) assets (building - land - equipment)
Contra Asset - noncurrent asset
an appraised value for land gives additional information that is useful to investors

41. Multistep Income Statement
Debit Balance - Retained Earnings - Temporary - Owners Equity
prepare financial statements
prepare adjusted trial balance
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income

42. Accounting Equation
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Net Income/Sales
similar to unearned revenue- liabilities

43. Inventory
debit balance - Balance sheet - permanent - asset
Revenues and Expenses
prepare financial statements
Debit Balance - Income Statement - temporary - Expense

44. Going Concern
Credit Balance - Balance Sheet - permanent - liability
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Payment x Rate x Time
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

45. Understandability
Net Income/Sales
to those willing to take time to understand it
Contributed Capital - Retained Earnings - Dividends
copyright - long term assets - noncurrent

46. 8th step of Accounting Cycle
prepare financial statements
Credit balance - Balance sheet and Retained Earnings - Permanent
debit balance - Balance sheet - permanent - asset
Sales Revenues

47. 4th step of Accounting Cycle
Assets - Liabilities - Equity
prepare Unadjusted trial balance
prepare financial statements
companies must reduce the value of land - if the value is lower than its original cost.

48. Balance Sheet Assets
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
post journal to general ledger
Debit Balance - Balance sheet - permanent - asset
an appraised value for land gives additional information that is useful to investors

49. Accts on balance sheet
Contributed Capital - Retained Earnings - Dividends
prepar journal to general ledger
each owner has its own books - records - financial statements that are seperate.
Assets - Liabilities - Equity

50. Accounts on Income Statement
Revenues and Expenses
post journal to general ledger
Contributed Capital - Retained Earnings - Dividends
wages payable - utilities payable - interest payable - unearned revenue - note payable