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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. Accounts Recievable
Credit Balance - Balance Sheet - Permanent - owners equity
Revenues-Expenses
prepare financial statements
Debit Balance - Balance sheet - permanent - asset

2. Relevance
an appraised value for land gives additional information that is useful to investors
prepare Unadjusted trial balance
prepare post-closing trial balance
Debit Balance - Income Statement - Temporary - expense

3. NonCurrent Assets
Contra Asset - noncurrent asset
the original amount to purchase land is verifiable through the contract documents
(long-term) assets (building - land - equipment)
debit balance - income statement - temporary - expense

4. NonCurrent Liabilities
Revenues and Expenses
longterm liabilities
debit balance - Balance sheet - permanent - asset
Revenues-Expenses

5. Calculating Net Income
debit balance - Balance sheet - permanent - asset
Revenues-Expenses
wages payable - utilities payable - interest payable - unearned revenue - note payable
Identify Accounts affected

6. 7th step of Accounting Cycle
how we measure - assumes economic mean
prepare adjusted trial balance
(long-term) assets (building - land - equipment)
copyright - long term assets - noncurrent

7. Accumulated depriciation
credit balance - balance sheet - permanent - liabilities
debit balance - balance sheet - permanent - asset
(cash - accts revievable - inventory) turn into cash within 12 months
(long-term) assets (building - land - equipment)

8. Multistep Income Statement
cost-salvage value/years of life
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
credit balance - balance sheet - permanent - liabilities
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income

9. 2nd step of analyzing transactions
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Contributed Capital - Retained Earnings - Dividends
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Credit balance - income statement - temporary - revenues

10. Interest Expense
to those willing to take time to understand it
prepare closing entry-post to general ledger
Current Assets/Current Liabilities
Debit Balance - Income Statement - temporary - Expense

11. 3rd step of Accounting Cycle
prepar journal to general ledger
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Retained earnings beg. balance - Net income - dividends.
credit balance - balance sheet - permanent - liabilities

12. Cash Principle
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
debit balance - balance sheet - permanent - asset
Contributed Capital - Retained Earnings - Dividends
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

13. Going Concern
Revenues and Expenses
Debit Balance - Income Statement - temporary - Expense
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

14. Accts on balance sheet
Payment x Rate x Time
Assets - Liabilities - Equity
Credit Balance - Balance Sheet - permanent - liability
prepare financial statements

15. Closing Entries
Debit Balance - Income Statement - temporary - Expense
credit balance - balance sheet - permanent - liabilities
Close out all revenue and expense accounts into retained earnings.
prepare financial statements

16. Current Ratio
Current Assets/Current Liabilities
credit balance - balance sheet - permanent - liabilities
post journal to general ledger
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

17. Income Satement Expenses
prepare adjusted trial balance
how we measure - assumes economic mean
determine the direction of the effect. debit or credit
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

18. Inventory
copyright - long term assets - noncurrent
debit balance - Balance sheet - permanent - asset
cost-salvage value/years of life
decrease equity - debit balance

19. Retained Earnings
Contributed Capital - Retained Earnings - Dividends
Identify Accounts affected
Credit balance - Balance sheet and Retained Earnings - Permanent
prepare Unadjusted trial balance

20. Sales revenue
credit balance - balance sheet - permanent - liabilities
copyright - long term assets - noncurrent
credit balance - income statement - temporary - Revenue
Retained earnings beg. balance - Net income - dividends.

21. Goodwill
credit balance - balance sheet - permanent - liabilities
debit balance - balance sheet - permanent - asset
Assets - Liabilities - Equity
prepare financial statements

22. Building
(long-term) assets (building - land - equipment)
Credit balance - Balance sheet and Retained Earnings - Permanent
debit balance - Balance sheet - Permanent - asset
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

23. 4th step of analyzing transactions
does the equation remain in balance?
prepare adjusted trial balance
Revenues and Expenses
copyright - long term assets - noncurrent

24. Calculating Cost depreciation
cost-salvage value/years of life
prepare adjusted trial balance
Debit Balance - Income Statement - temporary - Expense
Identify Accounts affected

25. Current Assets
(cash - accts revievable - inventory) turn into cash within 12 months
longterm liabilities
similar to unearned revenue- liabilities
debit balance - balance sheet - permanent - asset

26. Conservatism
companies must reduce the value of land - if the value is lower than its original cost.
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
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

27. Economic Equity
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
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.

28. Balance Sheet Liabilities
Debit Balance - Balance sheet - permanent - asset
Revenues-Expenses
wages payable - utilities payable - interest payable - unearned revenue - note payable
Retained earnings beg. balance - Net income - dividends.

29. Note Payable
Retained earnings beg. balance - Net income - dividends.
Credit Balance - Balance Sheet - Permanent - owners equity
Credit Balance - Balance Sheet - permanent - liability
record adjusting entries to general journal

30. 3rd step of analyzing transactions
determine the direction of the effect. debit or credit
prepar journal to general ledger
longterm liabilities
Close out all revenue and expense accounts into retained earnings.

31. 6th step of Accounting Cycle
prepare Unadjusted trial balance
Identify Accounts affected
companies must reduce the value of land - if the value is lower than its original cost.
post journal to general ledger

32. Dividends
decrease equity - debit balance
Identify Accounts affected
Close out all revenue and expense accounts into retained earnings.
determine the direction of the effect. debit or credit

33. Profit Margin %
Credit Balance - Balance Sheet - Permanent - owners equity
how we measure - assumes economic mean
Net Income/Sales
Contributed Capital - Retained Earnings - Dividends

34. Intangibles
Payment x Rate x Time
copyright - long term assets - noncurrent
record transactions in general journal
how we measure - assumes economic mean

35. Accts on Statement of Retained Earnings
Retained earnings beg. balance - Net income - dividends.
credit balance - balance sheet - permanent - liabilities
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

36. Consistency
companies must reduce the value of land - if the value is lower than its original cost.
similar to unearned revenue- liabilities
determine the direction of the effect. debit or credit
a company uses the same method each year for calculating inventory

37. Monetary Unit
wages payable - utilities payable - interest payable - unearned revenue - note payable
the original amount to purchase land is verifiable through the contract documents
how we measure - assumes economic mean
Close out all revenue and expense accounts into retained earnings.

38. 4th step of Accounting Cycle
copyright - long term assets - noncurrent
Contra Asset - noncurrent asset
prepare Unadjusted trial balance
Sales Revenues

39. Income Statement Revenues
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Sales Revenues
an appraised value for land gives additional information that is useful to investors
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

40. Accumlated depreciation
debit balance - income statement - temporary - expense
wages payable - utilities payable - interest payable - unearned revenue - note payable
Contra Asset - noncurrent asset
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

41. 10th step of Accounting Cycle
companies must reduce the value of land - if the value is lower than its original cost.
prepare post-closing trial balance
an appraised value for land gives additional information that is useful to investors
how we measure - assumes economic mean

42. 1st Step of Analying Transactions
Debit Balance - Retained Earnings - Temporary - Owners Equity
decrease equity - debit balance
Identify Accounts affected
Revenues-Expenses

43. Balance sheet Equity
to those willing to take time to understand it
Debit Balance - Income Statement - Temporary - expense
Contributed Capital - Retained Earnings - Dividends
Revenues and Expenses

44. Balance Sheet Assets
record transactions in general journal
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Assets - Liabilities - Equity
Credit balance - income statement - temporary - revenues

45. 2nd step of Accounting Cycle
prepare adjusted trial balance
Identify Accounts affected
record transactions in general journal
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

46. Materiality

47. Interest Revenue
Credit balance - income statement - temporary - revenues
determine the direction of the effect. debit or credit
(cash - accts revievable - inventory) turn into cash within 12 months
companies must reduce the value of land - if the value is lower than its original cost.

48. Utilities expense
(cash - accts revievable - inventory) turn into cash within 12 months
cost-salvage value/years of life
debit balance - income statement - temporary - expense
copyright - long term assets - noncurrent

49. Calculating Interest Formula
a company uses the same method each year for calculating inventory
Assets - Liabilities - Equity
prepare Unadjusted trial balance
Payment x Rate x Time

50. Understandability
Credit balance - Balance sheet and Retained Earnings - Permanent
does the equation remain in balance?
to those willing to take time to understand it
Contributed Capital - Retained Earnings - Dividends