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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. NonCurrent Liabilities
Credit balance - Balance sheet and Retained Earnings - Permanent
longterm liabilities
(long-term) assets (building - land - equipment)
debit balance - balance sheet - permanent - asset

2. Accounting Equation
Debit Balance - Retained Earnings - Temporary - Owners Equity
credit balance - balance sheet - permanent - liabilities
prepare financial statements
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

3. 3rd step of analyzing transactions
a company uses the same method each year for calculating inventory
determine the direction of the effect. debit or credit
prepare post-closing trial balance
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

4. Monetary Unit
how we measure - assumes economic mean
Current Assets/Current Liabilities
companies must reduce the value of land - if the value is lower than its original cost.
wages payable - utilities payable - interest payable - unearned revenue - note payable

5. Sales revenue
Credit Balance - Balance Sheet - Permanent - owners equity
credit balance - income statement - temporary - Revenue
Contra Asset - noncurrent asset
prepare closing entry-post to general ledger

6. Inventory
determine the direction of the effect. debit or credit
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
post journal to general ledger
debit balance - Balance sheet - permanent - asset

7. Intangibles
analyze transactions from external events
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
copyright - long term assets - noncurrent

8. Balance Sheet Liabilities
Credit balance - income statement - temporary - revenues
wages payable - utilities payable - interest payable - unearned revenue - note payable
post journal to general ledger
analyze transactions from external events

9. Cost of Goods Sold
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
cost-salvage value/years of life
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Debit Balance - Income Statement - Temporary - expense

10. Prepaid insurance
Payment x Rate x Time
debit balance - balance sheet - permanent - asset
Assets - Liabilities - Equity
an appraised value for land gives additional information that is useful to investors

11. 5th step of Accounting Cycle
longterm liabilities
the original amount to purchase land is verifiable through the contract documents
record adjusting entries to general journal
Debit Balance - Income Statement - Temporary - expense

12. 10th step of Accounting Cycle
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.
prepare post-closing trial balance
decrease equity - debit balance

13. Materiality

14. Consistency
credit balance - balance sheet - permanent - liabilities
analyze transactions from external events
a company uses the same method each year for calculating inventory
prepare adjusted trial balance

15. 6th step of Accounting Cycle
post journal to general ledger
Credit Balance - Balance Sheet - permanent - liability
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
prepare adjusted trial balance

16. Utilities expense
Payment x Rate x Time
prepare closing entry-post to general ledger
debit balance - income statement - temporary - expense
similar to unearned revenue- liabilities

17. Dividends
cost-salvage value/years of life
credit balance - balance sheet - permanent - liabilities
decrease equity - debit balance
Credit balance - income statement - temporary - revenues

18. Dividends
Debit Balance - Retained Earnings - Temporary - Owners Equity
each owner has its own books - records - financial statements that are seperate.
cost-salvage value/years of life
debit balance - balance sheet - permanent - asset

19. Building
Close out all revenue and expense accounts into retained earnings.
an appraised value for land gives additional information that is useful to investors
cost-salvage value/years of life
debit balance - Balance sheet - Permanent - asset

20. Accts on Statement of Retained Earnings
Retained earnings beg. balance - Net income - dividends.
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
how we measure - assumes economic mean
Close out all revenue and expense accounts into retained earnings.

21. Reliability
Debit Balance - Balance sheet - permanent - asset
Identify Accounts affected
cost-salvage value/years of life
the original amount to purchase land is verifiable through the contract documents

22. Accumulated depriciation
credit balance - balance sheet - permanent - liabilities
prepare adjusted trial balance
prepar journal to general ledger
debit balance - Balance sheet - permanent - asset

23. 9th step of Accounting Cycle
Credit balance - Balance sheet and Retained Earnings - Permanent
credit balance - income statement - temporary - Revenue
prepare closing entry-post to general ledger
debit balance - balance sheet - permanent - asset

24. Balance sheet Equity
Contributed Capital - Retained Earnings - Dividends
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
debit balance - income statement - temporary - expense

25. Accounts Recievable
an appraised value for land gives additional information that is useful to investors
similar to unearned revenue- liabilities
(long-term) assets (building - land - equipment)
Debit Balance - Balance sheet - permanent - asset

26. Income Satement Expenses
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
longterm liabilities
Credit balance - Balance sheet and Retained Earnings - Permanent
Debit Balance - Income Statement - Temporary - expense

27. Balance Sheet Assets
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
debit balance - balance sheet - permanent - asset
debit balance - Balance sheet - permanent - asset
Contra Asset - noncurrent asset

28. 1st Step of Analying Transactions
decrease equity - debit balance
Identify Accounts affected
copyright - long term assets - noncurrent
credit balance - balance sheet - permanent - liabilities

29. Current Assets
debit balance - income statement - temporary - expense
(cash - accts revievable - inventory) turn into cash within 12 months
to those willing to take time to understand it
Net Income/Sales

30. Note Payable
copyright - long term assets - noncurrent
Credit Balance - Balance Sheet - permanent - liability
Retained earnings beg. balance - Net income - dividends.
credit balance - balance sheet - permanent - liabilities

31. Income Statement Revenues
how we measure - assumes economic mean
Current Assets/Current Liabilities
Debit Balance - Retained Earnings - Temporary - Owners Equity
Sales Revenues

32. Economic Equity
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.
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

33. Calculating Net Income
debit balance - balance sheet - permanent - asset
Retained earnings beg. balance - Net income - dividends.
Revenues-Expenses
Contributed Capital - Retained Earnings - Dividends

34. 4th step of analyzing transactions
Contra Asset - noncurrent asset
Debit Balance - Income Statement - temporary - Expense
each owner has its own books - records - financial statements that are seperate.
does the equation remain in balance?

35. Current Ratio
companies must reduce the value of land - if the value is lower than its original cost.
a company uses the same method each year for calculating inventory
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Current Assets/Current Liabilities

36. Going Concern
debit balance - Balance sheet - permanent - asset
prepare financial statements
Debit Balance - Balance sheet - permanent - asset
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

37. Understandability
debit balance - income statement - temporary - expense
to those willing to take time to understand it
Contributed Capital - Retained Earnings - Dividends
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

38. Common Stock
companies must reduce the value of land - if the value is lower than its original cost.
Credit Balance - Balance Sheet - Permanent - owners equity
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Contra Asset - noncurrent asset

39. Calculating Interest Formula
Payment x Rate x Time
credit balance - balance sheet - permanent - liabilities
copyright - long term assets - noncurrent
a company uses the same method each year for calculating inventory

40. 8th step of Accounting Cycle
prepare financial statements
prepare adjusted trial balance
(long-term) assets (building - land - equipment)
Net Income/Sales

41. Accumlated depreciation
Contra Asset - noncurrent asset
record transactions in general journal
credit balance - income statement - temporary - Revenue
companies must reduce the value of land - if the value is lower than its original cost.

42. Cash Principle
prepare post-closing trial balance
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
prepare adjusted trial balance
Debit Balance - Balance sheet - permanent - asset

43. Calculating Cost depreciation
cost-salvage value/years of life
record transactions in general journal
debit balance - balance sheet - permanent - asset
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

44. Closing Entries
Close out all revenue and expense accounts into retained earnings.
a company uses the same method each year for calculating inventory
Credit Balance - Balance Sheet - permanent - liability
Net Income/Sales

45. 2nd step of Accounting Cycle
does the equation remain in balance?
cost-salvage value/years of life
the original amount to purchase land is verifiable through the contract documents
record transactions in general journal

46. Accts on balance sheet
Assets - Liabilities - Equity
Retained earnings beg. balance - Net income - dividends.
debit balance - income statement - temporary - expense
prepare closing entry-post to general ledger

47. Goodwill
credit balance - balance sheet - permanent - liabilities
analyze transactions from external events
debit balance - balance sheet - permanent - asset
Debit Balance - Income Statement - temporary - Expense

48. Accounts on Income Statement
prepare post-closing trial balance
Revenues and Expenses
(cash - accts revievable - inventory) turn into cash within 12 months
record transactions in general journal

49. Interest Expense
(cash - accts revievable - inventory) turn into cash within 12 months
prepare Unadjusted trial balance
Debit Balance - Retained Earnings - Temporary - Owners Equity
Debit Balance - Income Statement - temporary - Expense

50. Retained Earnings
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
debit balance - balance sheet - permanent - asset
prepare financial statements
Credit balance - Balance sheet and Retained Earnings - Permanent