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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. Goodwill
debit balance - balance sheet - permanent - asset
the original amount to purchase land is verifiable through the contract documents
decrease equity - debit balance
Retained earnings beg. balance - Net income - dividends.

2. 2nd step of analyzing transactions
record adjusting entries to general journal
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Debit Balance - Income Statement - temporary - Expense
Debit Balance - Income Statement - Temporary - expense

3. Interest Expense
Debit Balance - Income Statement - temporary - Expense
record adjusting entries to general journal
record transactions in general journal
Net Income/Sales

4. Intangibles
credit balance - balance sheet - permanent - liabilities
copyright - long term assets - noncurrent
Sales Revenues
prepare financial statements

5. 9th step of Accounting Cycle
prepare closing entry-post to general ledger
Revenues and Expenses
(long-term) assets (building - land - equipment)
Revenues-Expenses

6. Relevance
credit balance - income statement - temporary - Revenue
decrease equity - debit balance
(long-term) assets (building - land - equipment)
an appraised value for land gives additional information that is useful to investors

7. Common Stock
prepare closing entry-post to general ledger
Payment x Rate x Time
Credit Balance - Balance Sheet - Permanent - owners equity
Revenues and Expenses

8. Consistency
Payment x Rate x Time
decrease equity - debit balance
longterm liabilities
a company uses the same method each year for calculating inventory

9. 3rd step of analyzing transactions
each owner has its own books - records - financial statements that are seperate.
prepare post-closing trial balance
determine the direction of the effect. debit or credit
debit balance - income statement - temporary - expense

10. Balance Sheet Liabilities
wages payable - utilities payable - interest payable - unearned revenue - note payable
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
debit balance - balance sheet - permanent - asset
Credit Balance - Balance Sheet - Permanent - owners equity

11. 6th step of Accounting Cycle
post journal to general ledger
Credit Balance - Balance Sheet - permanent - liability
an appraised value for land gives additional information that is useful to investors
Revenues and Expenses

12. 8th step of Accounting Cycle
debit balance - balance sheet - permanent - asset
prepare financial statements
prepare closing entry-post to general ledger
determine the direction of the effect. debit or credit

13. Income Satement Expenses
Identify Accounts affected
companies must reduce the value of land - if the value is lower than its original cost.
record adjusting entries to general journal
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

14. Inventory
credit balance - balance sheet - permanent - liabilities
debit balance - Balance sheet - permanent - asset
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
prepare financial statements

15. Note Payable
Credit Balance - Balance Sheet - permanent - liability
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
prepare Unadjusted trial balance

16. Building
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
debit balance - Balance sheet - Permanent - asset
Assets - Liabilities - Equity
wages payable - utilities payable - interest payable - unearned revenue - note payable

17. Calculating Net Income
debit balance - Balance sheet - Permanent - asset
Revenues-Expenses
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
debit balance - Balance sheet - permanent - asset

18. Reliability
prepare Unadjusted trial balance
Current Assets/Current Liabilities
debit balance - Balance sheet - Permanent - asset
the original amount to purchase land is verifiable through the contract documents

19. Accounts Recievable
Debit Balance - Balance sheet - permanent - asset
prepar journal to general ledger
Retained earnings beg. balance - Net income - dividends.
decrease equity - debit balance

20. 3rd step of Accounting Cycle
Credit balance - income statement - temporary - revenues
prepar journal to general ledger
credit balance - income statement - temporary - Revenue
Credit balance - Balance sheet and Retained Earnings - Permanent

21. Accts on Statement of Retained Earnings
credit balance - balance sheet - permanent - liabilities
credit balance - income statement - temporary - Revenue
Retained earnings beg. balance - Net income - dividends.
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income

22. 1st Step of Analying Transactions
Identify Accounts affected
Sales Revenues
Debit Balance - Balance sheet - permanent - asset
prepare adjusted trial balance

23. 7th step of Accounting Cycle
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
prepare adjusted trial balance
(cash - accts revievable - inventory) turn into cash within 12 months
Debit Balance - Balance sheet - permanent - asset

24. Closing Entries
Debit Balance - Retained Earnings - Temporary - Owners Equity
Close out all revenue and expense accounts into retained earnings.
Payment x Rate x Time
Net Income/Sales

25. Cost of Goods Sold
Assets - Liabilities - Equity
does the equation remain in balance?
Debit Balance - Income Statement - Temporary - expense
debit balance - balance sheet - permanent - asset

26. Accounts on Income Statement
Revenues and Expenses
decrease equity - debit balance
wages payable - utilities payable - interest payable - unearned revenue - note payable
analyze transactions from external events

27. 1st step of Accounting Cycle
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
prepare financial statements
analyze transactions from external events
Credit Balance - Balance Sheet - Permanent - owners equity

28. Profit Margin %
Net Income/Sales
Contra Asset - noncurrent asset
debit balance - balance sheet - permanent - asset
does the equation remain in balance?

29. Balance sheet Equity
Contra Asset - noncurrent asset
Debit Balance - Income Statement - temporary - Expense
cost-salvage value/years of life
Contributed Capital - Retained Earnings - Dividends

30. 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.
prepare closing entry-post to general ledger
Net Income/Sales

31. Dividends
determine the direction of the effect. debit or credit
prepare closing entry-post to general ledger
Sales Revenues
Debit Balance - Retained Earnings - Temporary - Owners Equity

32. Economic Equity
decrease equity - debit balance
prepare adjusted trial balance
each owner has its own books - records - financial statements that are seperate.
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

33. Accumlated depreciation
Contra Asset - noncurrent asset
Retained earnings beg. balance - Net income - dividends.
Debit Balance - Retained Earnings - Temporary - Owners Equity
prepare Unadjusted trial balance

34. Sales revenue
copyright - long term assets - noncurrent
credit balance - income statement - temporary - Revenue
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Debit Balance - Income Statement - temporary - Expense

35. Accts on balance sheet
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Assets - Liabilities - Equity
Retained earnings beg. balance - Net income - dividends.
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

36. Monetary Unit
Contra Asset - noncurrent asset
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
how we measure - assumes economic mean
to those willing to take time to understand it

37. Income Statement Revenues
Contra Asset - noncurrent asset
Payment x Rate x Time
debit balance - Balance sheet - permanent - asset
Sales Revenues

38. Conservatism
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
to those willing to take time to understand it
Credit balance - Balance sheet and Retained Earnings - Permanent
companies must reduce the value of land - if the value is lower than its original cost.

39. 4th step of analyzing transactions
Close out all revenue and expense accounts into retained earnings.
(long-term) assets (building - land - equipment)
does the equation remain in balance?
debit balance - balance sheet - permanent - asset

40. 2nd step of Accounting Cycle
decrease equity - debit balance
similar to unearned revenue- liabilities
record transactions in general journal
wages payable - utilities payable - interest payable - unearned revenue - note payable

41. Customer deposits
similar to unearned revenue- liabilities
prepar journal to general ledger
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Debit Balance - Retained Earnings - Temporary - Owners Equity

42. Accumulated depriciation
credit balance - balance sheet - permanent - liabilities
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
cost-salvage value/years of life
Current Assets/Current Liabilities

43. Calculating Cost depreciation
record transactions in general journal
credit balance - balance sheet - permanent - liabilities
cost-salvage value/years of life
analyze transactions from external events

44. Accounting Equation
Revenues and Expenses
a company uses the same method each year for calculating inventory
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Credit Balance - Balance Sheet - permanent - liability

45. Current Assets
(cash - accts revievable - inventory) turn into cash within 12 months
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
prepare Unadjusted trial balance

46. 10th step of Accounting Cycle
debit balance - Balance sheet - permanent - asset
Contra Asset - noncurrent asset
prepare post-closing trial balance
Credit Balance - Balance Sheet - Permanent - owners equity

47. Utilities expense
debit balance - income statement - temporary - expense
Current Assets/Current Liabilities
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.

48. Current Ratio
prepare Unadjusted trial balance
Revenues and Expenses
Close out all revenue and expense accounts into retained earnings.
Current Assets/Current Liabilities

49. Balance Sheet Assets
Debit Balance - Balance sheet - permanent - asset
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
determine the direction of the effect. debit or credit
credit balance - balance sheet - permanent - liabilities

50. Materiality