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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. Consistency
a company uses the same method each year for calculating inventory
prepare closing entry-post to general ledger
Net Income/Sales
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

2. 4th step of Accounting Cycle
credit balance - income statement - temporary - Revenue
prepare Unadjusted trial 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.
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

3. Calculating Cost depreciation
longterm liabilities
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
cost-salvage value/years of life

4. Economic Equity
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.
cost-salvage value/years of life
credit balance - balance sheet - permanent - liabilities

5. 5th step of Accounting Cycle
record adjusting entries to general journal
prepare adjusted trial balance
Sales Revenues
Credit Balance - Balance Sheet - Permanent - owners equity

6. Dividends
Retained earnings beg. balance - Net income - dividends.
Close out all revenue and expense accounts into retained earnings.
Debit Balance - Retained Earnings - Temporary - Owners Equity
Payment x Rate x Time

7. Utilities expense
how we measure - assumes economic mean
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
debit balance - income statement - temporary - expense
debit balance - balance sheet - permanent - asset

8. Understandability
Debit Balance - Retained Earnings - Temporary - Owners Equity
decrease equity - debit balance
to those willing to take time to understand it
similar to unearned revenue- liabilities

9. NonCurrent Liabilities
longterm liabilities
record adjusting entries to general journal
Debit Balance - Balance sheet - permanent - asset
Credit balance - Balance sheet and Retained Earnings - Permanent

10. Interest Revenue
an appraised value for land gives additional information that is useful to investors
Credit balance - income statement - temporary - revenues
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.

11. Relevance
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
an appraised value for land gives additional information that is useful to investors
Assets - Liabilities - Equity
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

12. Intangibles
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.
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
copyright - long term assets - noncurrent

13. Multistep Income Statement
record adjusting entries to general journal
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
to those willing to take time to understand it
Retained earnings beg. balance - Net income - dividends.

14. 8th step of Accounting Cycle
Credit balance - income statement - temporary - revenues
Debit Balance - Retained Earnings - Temporary - Owners Equity
prepare financial statements
prepare adjusted trial balance

15. Current Ratio
(long-term) assets (building - land - equipment)
Current Assets/Current Liabilities
a company uses the same method each year for calculating inventory
debit balance - income statement - temporary - expense

16. Balance Sheet Assets
credit balance - balance sheet - permanent - liabilities
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Debit Balance - Income Statement - Temporary - expense
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

17. NonCurrent Assets
debit balance - balance sheet - permanent - asset
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 - Retained Earnings - Temporary - Owners Equity
(long-term) assets (building - land - equipment)

18. 4th step of analyzing transactions
each owner has its own books - records - financial statements that are seperate.
(cash - accts revievable - inventory) turn into cash within 12 months
Payment x Rate x Time
does the equation remain in balance?

19. Accumulated depriciation
Identify Accounts affected
Credit balance - income statement - temporary - revenues
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

20. Accounts on Income Statement
a company uses the same method each year for calculating inventory
Revenues and Expenses
Debit Balance - Income Statement - temporary - Expense
cost-salvage value/years of life

21. Dividends
longterm liabilities
decrease equity - debit balance
Credit balance - Balance sheet and Retained Earnings - Permanent
a company uses the same method each year for calculating inventory

22. Note Payable
Contributed Capital - Retained Earnings - Dividends
Credit Balance - Balance Sheet - permanent - liability
copyright - long term assets - noncurrent
Debit Balance - Retained Earnings - Temporary - Owners Equity

23. Accts on Statement of Retained Earnings
Retained earnings beg. balance - Net income - dividends.
(cash - accts revievable - inventory) turn into cash within 12 months
an appraised value for land gives additional information that is useful to investors
prepare Unadjusted trial balance

24. Prepaid insurance
debit balance - balance sheet - permanent - asset
credit balance - balance sheet - permanent - liabilities
prepare post-closing trial 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.

25. 3rd step of Accounting Cycle
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
prepar journal to general ledger
prepare Unadjusted trial balance

26. 1st step of Accounting Cycle
prepare post-closing trial balance
analyze transactions from external events
Debit Balance - Income Statement - temporary - Expense
to those willing to take time to understand it

27. Building
Revenues-Expenses
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
debit balance - Balance sheet - Permanent - asset
copyright - long term assets - noncurrent

28. Cash Principle
Close out all revenue and expense accounts into retained earnings.
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
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

29. Interest Expense
Contributed Capital - Retained Earnings - Dividends
does the equation remain in balance?
(long-term) assets (building - land - equipment)
Debit Balance - Income Statement - temporary - Expense

30. 6th step of Accounting Cycle
debit balance - balance sheet - permanent - asset
post journal to general ledger
record transactions in general journal
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

31. Customer deposits
similar to unearned revenue- liabilities
Credit Balance - Balance Sheet - permanent - liability
Payment x Rate x Time
debit balance - balance sheet - permanent - asset

32. Materiality

33. Reliability
analyze transactions from external events
does the equation remain in balance?
the original amount to purchase land is verifiable through the contract documents
an appraised value for land gives additional information that is useful to investors

34. 2nd step of analyzing transactions
Revenues-Expenses
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Contributed Capital - Retained Earnings - Dividends
copyright - long term assets - noncurrent

35. 9th step of Accounting Cycle
debit balance - Balance sheet - permanent - asset
prepare closing entry-post to general ledger
Retained earnings beg. balance - Net income - dividends.
analyze transactions from external events

36. Cost of Goods Sold
Revenues-Expenses
Debit Balance - Income Statement - Temporary - expense
debit balance - Balance sheet - permanent - asset
Credit Balance - Balance Sheet - permanent - liability

37. Closing Entries
(cash - accts revievable - inventory) turn into cash within 12 months
Close out all revenue and expense accounts into retained earnings.
Net Income/Sales
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

38. Calculating Net Income
longterm liabilities
debit balance - Balance sheet - Permanent - asset
prepare adjusted trial balance
Revenues-Expenses

39. Sales revenue
debit balance - Balance sheet - permanent - asset
analyze transactions from external events
each owner has its own books - records - financial statements that are seperate.
credit balance - income statement - temporary - Revenue

40. Accounts Recievable
Credit balance - Balance sheet and Retained Earnings - Permanent
similar to unearned revenue- liabilities
Debit Balance - Balance sheet - permanent - asset
each owner has its own books - records - financial statements that are seperate.

41. 2nd step of Accounting Cycle
record transactions in general journal
determine the direction of the effect. debit or credit
Contra Asset - noncurrent asset
(cash - accts revievable - inventory) turn into cash within 12 months

42. Retained Earnings
Debit Balance - Income Statement - temporary - Expense
Credit balance - Balance sheet and Retained Earnings - Permanent
wages payable - utilities payable - interest payable - unearned revenue - note payable
Identify Accounts affected

43. Accumlated depreciation
Contra Asset - noncurrent asset
Current Assets/Current Liabilities
how we measure - assumes economic mean
prepar journal to general ledger

44. Accounting Equation
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.
debit balance - Balance sheet - Permanent - asset
to those willing to take time to understand it

45. Balance Sheet Liabilities
wages payable - utilities payable - interest payable - unearned revenue - note payable
does the equation remain in balance?
Credit balance - income statement - temporary - revenues
companies must reduce the value of land - if the value is lower than its original cost.

46. Current Assets
Contributed Capital - Retained Earnings - Dividends
determine the direction of the effect. debit or credit
(cash - accts revievable - inventory) turn into cash within 12 months
Revenues-Expenses

47. Calculating Interest Formula
Payment x Rate x Time
Current Assets/Current Liabilities
credit balance - balance sheet - permanent - liabilities
prepare closing entry-post to general ledger

48. 10th step of Accounting Cycle
(long-term) assets (building - land - equipment)
prepare post-closing trial balance
Identify Accounts affected
companies must reduce the value of land - if the value is lower than its original cost.

49. Unearned revenue
debit balance - Balance sheet - Permanent - asset
credit balance - balance sheet - permanent - liabilities
Assets - Liabilities - Equity
cost-salvage value/years of life

50. Common Stock
credit balance - income statement - temporary - Revenue
Contributed Capital - Retained Earnings - Dividends
Debit Balance - Retained Earnings - Temporary - Owners Equity
Credit Balance - Balance Sheet - Permanent - owners equity