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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. Materiality

2. Calculating Cost depreciation
Credit balance - Balance sheet and Retained Earnings - Permanent
debit balance - Balance sheet - Permanent - asset
Contributed Capital - Retained Earnings - Dividends
cost-salvage value/years of life

3. Accumulated depriciation
the original amount to purchase land is verifiable through the contract documents
credit balance - balance sheet - permanent - liabilities
wages payable - utilities payable - interest payable - unearned revenue - note payable
Revenues and Expenses

4. Sales revenue
credit balance - income statement - temporary - Revenue
Credit Balance - Balance Sheet - permanent - liability
Identify Accounts affected
Retained earnings beg. balance - Net income - dividends.

5. Balance sheet Equity
an appraised value for land gives additional information that is useful to investors
Contributed Capital - Retained Earnings - Dividends
Current Assets/Current Liabilities
debit balance - balance sheet - permanent - asset

6. 8th step of Accounting Cycle
Sales Revenues
prepare financial statements
Revenues-Expenses
post journal to general ledger

7. Economic Equity
Credit balance - income statement - temporary - revenues
record transactions in general journal
Debit Balance - Income Statement - Temporary - expense
each owner has its own books - records - financial statements that are seperate.

8. 2nd step of Accounting Cycle
debit balance - income statement - temporary - expense
does the equation remain in balance?
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
record transactions in general journal

9. 9th step of Accounting Cycle
prepare closing entry-post to general ledger
Debit Balance - Income Statement - temporary - Expense
Credit Balance - Balance Sheet - Permanent - owners equity
Revenues-Expenses

10. 7th step of Accounting Cycle
Net Income/Sales
prepare adjusted trial balance
(long-term) assets (building - land - equipment)
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

11. Accumlated depreciation
Contra Asset - noncurrent 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.
copyright - long term assets - noncurrent
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

12. 5th step of Accounting Cycle
analyze transactions from external events
Payment x Rate x Time
Sales Revenues
record adjusting entries to general journal

13. 3rd step of analyzing transactions
cost-salvage value/years of life
record adjusting entries to general journal
determine the direction of the effect. debit or credit
credit balance - balance sheet - permanent - liabilities

14. Balance Sheet Assets
Net Income/Sales
post journal to general ledger
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Debit Balance - Retained Earnings - Temporary - Owners Equity

15. NonCurrent Assets
to those willing to take time to understand it
Identify Accounts affected
debit balance - income statement - temporary - expense
(long-term) assets (building - land - equipment)

16. Intangibles
copyright - long term assets - noncurrent
Identify Accounts affected
(long-term) assets (building - land - equipment)
post journal to general ledger

17. Calculating Interest Formula
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Payment x Rate x Time
prepare adjusted trial balance
(long-term) assets (building - land - equipment)

18. Customer deposits
companies must reduce the value of land - if the value is lower than its original cost.
Debit Balance - Income Statement - Temporary - expense
similar to unearned revenue- liabilities
Assets - Liabilities - Equity

19. Monetary Unit
the original amount to purchase land is verifiable through the contract documents
how we measure - assumes economic mean
wages payable - utilities payable - interest payable - unearned revenue - note payable
Identify Accounts affected

20. Income Statement Revenues
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Sales Revenues
prepare post-closing trial balance
prepare financial statements

21. Relevance
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
an appraised value for land gives additional information that is useful to investors
Debit Balance - Income Statement - temporary - Expense
prepare adjusted trial balance

22. Reliability
the original amount to purchase land is verifiable through the contract documents
Revenues and Expenses
how we measure - assumes economic mean
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

23. 2nd step of analyzing transactions
wages payable - utilities payable - interest payable - unearned revenue - note payable
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Contra Asset - noncurrent asset
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

24. 10th step of Accounting Cycle
Retained earnings beg. balance - Net income - dividends.
prepare closing entry-post to general ledger
prepare post-closing trial balance
decrease equity - debit balance

25. Going Concern
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Revenues-Expenses
Close out all revenue and expense accounts into retained earnings.
record adjusting entries to general journal

26. Current Ratio
Debit Balance - Balance sheet - permanent - asset
Close out all revenue and expense accounts into retained earnings.
debit balance - balance sheet - permanent - asset
Current Assets/Current Liabilities

27. Note Payable
(cash - accts revievable - inventory) turn into cash within 12 months
Credit Balance - Balance Sheet - permanent - liability
does the equation remain in balance?
Close out all revenue and expense accounts into retained earnings.

28. NonCurrent Liabilities
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Contributed Capital - Retained Earnings - Dividends
longterm liabilities
Revenues and Expenses

29. Conservatism
debit balance - balance sheet - permanent - asset
record adjusting entries to general journal
companies must reduce the value of land - if the value is lower than its original cost.
Contra Asset - noncurrent asset

30. Closing Entries
Close out all revenue and expense accounts into retained earnings.
Contributed Capital - Retained Earnings - Dividends
the original amount to purchase land is verifiable through the contract documents
Revenues and Expenses

31. Income Satement Expenses
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Revenues and Expenses
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.

32. Accounts on Income Statement
Revenues and Expenses
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Revenues-Expenses
Debit Balance - Income Statement - Temporary - expense

33. Multistep Income Statement
how we measure - assumes economic mean
debit balance - income statement - temporary - expense
to those willing to take time to understand it
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income

34. Cost of Goods Sold
Debit Balance - Income Statement - Temporary - expense
longterm liabilities
Credit Balance - Balance Sheet - permanent - liability
each owner has its own books - records - financial statements that are seperate.

35. Profit Margin %
debit balance - income statement - temporary - expense
to those willing to take time to understand it
Assets - Liabilities - Equity
Net Income/Sales

36. 6th step of Accounting Cycle
prepare financial statements
copyright - long term assets - noncurrent
post journal to general ledger
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

37. Common Stock
prepar journal to general ledger
Credit Balance - Balance Sheet - Permanent - owners equity
longterm liabilities
credit balance - income statement - temporary - Revenue

38. Interest Revenue
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.
prepare financial statements
Credit balance - income statement - temporary - revenues

39. Accounting Equation
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
companies must reduce the value of land - if the value is lower than its original cost.
credit balance - balance sheet - permanent - liabilities
Contributed Capital - Retained Earnings - Dividends

40. Dividends
decrease equity - debit balance
cost-salvage value/years of life
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Contributed Capital - Retained Earnings - Dividends

41. Understandability
to those willing to take time to understand it
prepare financial statements
prepar journal to general ledger
Credit balance - Balance sheet and Retained Earnings - Permanent

42. 1st Step of Analying Transactions
record transactions in general journal
Identify Accounts affected
a company uses the same method each year for calculating inventory
cost-salvage value/years of life

43. 4th step of Accounting Cycle
prepare Unadjusted trial balance
Debit Balance - Retained Earnings - Temporary - Owners Equity
Net Income/Sales
determine the direction of the effect. debit or credit

44. Cash Principle
credit balance - balance sheet - permanent - liabilities
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
how we measure - assumes economic mean
Identify Accounts affected

45. Unearned revenue
an appraised value for land gives additional information that is useful to investors
prepare closing entry-post to general ledger
determine the direction of the effect. debit or credit
credit balance - balance sheet - permanent - liabilities

46. Building
debit balance - Balance sheet - Permanent - asset
cost-salvage value/years of life
Identify Accounts affected
each owner has its own books - records - financial statements that are seperate.

47. Goodwill
Debit Balance - Retained Earnings - Temporary - Owners Equity
debit balance - balance sheet - permanent - asset
cost-salvage value/years of life
companies must reduce the value of land - if the value is lower than its original cost.

48. 3rd step of Accounting Cycle
the original amount to purchase land is verifiable through the contract documents
prepar journal to general ledger
companies must reduce the value of land - if the value is lower than its original cost.
prepare Unadjusted trial balance

49. Utilities expense
how we measure - assumes economic mean
credit balance - balance sheet - permanent - liabilities
Debit Balance - Retained Earnings - Temporary - Owners Equity
debit balance - income statement - temporary - expense

50. Accts on Statement of Retained Earnings
Retained earnings beg. balance - Net income - dividends.
post journal to general ledger
analyze transactions from external events
Debit Balance - Retained Earnings - Temporary - Owners Equity