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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. 3rd step of Accounting Cycle
prepare Unadjusted trial balance
prepar journal to general ledger
the original amount to purchase land is verifiable through the contract documents
(long-term) assets (building - land - equipment)

2. 2nd step of analyzing transactions
Contributed Capital - Retained Earnings - Dividends
Credit Balance - Balance Sheet - permanent - liability
similar to unearned revenue- liabilities
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

3. Accumulated depriciation
credit balance - balance sheet - permanent - liabilities
each owner has its own books - records - financial statements that are seperate.
prepar journal to general ledger
Sales Revenues

4. 9th step of Accounting Cycle
determine the direction of the effect. debit or credit
an appraised value for land gives additional information that is useful to investors
prepare closing entry-post to general ledger
Sales Revenues

5. Closing Entries
Close out all revenue and expense accounts into retained earnings.
cost-salvage value/years of life
credit balance - balance sheet - permanent - liabilities
prepare Unadjusted trial balance

6. 7th step of Accounting Cycle
prepare adjusted trial balance
does the equation remain in balance?
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

7. Multistep Income Statement
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
a company uses the same method each year for calculating inventory
Credit balance - Balance sheet and Retained Earnings - Permanent
prepare post-closing trial balance

8. Materiality

9. Balance Sheet Liabilities
post journal to general ledger
wages payable - utilities payable - interest payable - unearned revenue - note payable
prepar journal to general ledger
Debit Balance - Retained Earnings - Temporary - Owners Equity

10. Conservatism
Contra Asset - noncurrent asset
an appraised value for land gives additional information that is useful to investors
companies must reduce the value of land - if the value is lower than its original cost.
Revenues and Expenses

11. Unearned revenue
Contributed Capital - Retained Earnings - Dividends
decrease equity - debit balance
copyright - long term assets - noncurrent
credit balance - balance sheet - permanent - liabilities

12. Income Satement Expenses
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
prepar journal to general ledger
Contra Asset - noncurrent asset
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

13. Accounts on Income Statement
Revenues and Expenses
credit balance - income statement - temporary - Revenue
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
prepare closing entry-post to general ledger

14. Income Statement Revenues
an appraised value for land gives additional information that is useful to investors
Credit Balance - Balance Sheet - permanent - liability
Sales Revenues
wages payable - utilities payable - interest payable - unearned revenue - note payable

15. Retained Earnings
prepare financial statements
prepare adjusted trial balance
Credit balance - Balance sheet and Retained Earnings - Permanent
to those willing to take time to understand it

16. Calculating Net Income
debit balance - income statement - temporary - expense
each owner has its own books - records - financial statements that are seperate.
(cash - accts revievable - inventory) turn into cash within 12 months
Revenues-Expenses

17. Utilities expense
prepar journal to general ledger
a company uses the same method each year for calculating inventory
copyright - long term assets - noncurrent
debit balance - income statement - temporary - expense

18. Current Ratio
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Credit Balance - Balance Sheet - permanent - liability
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Current Assets/Current Liabilities

19. 2nd step of Accounting Cycle
companies must reduce the value of land - if the value is lower than its original cost.
record transactions in general journal
the original amount to purchase land is verifiable through the contract documents
longterm liabilities

20. Calculating Interest Formula
prepare financial statements
copyright - long term assets - noncurrent
prepare closing entry-post to general ledger
Payment x Rate x Time

21. 10th step of Accounting Cycle
does the equation remain in balance?
Debit Balance - Balance sheet - permanent - asset
prepare post-closing trial balance
Assets - Liabilities - Equity

22. 4th step of Accounting Cycle
Contributed Capital - Retained Earnings - Dividends
(long-term) assets (building - land - equipment)
prepare Unadjusted trial balance
Debit Balance - Retained Earnings - Temporary - Owners Equity

23. Customer deposits
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
wages payable - utilities payable - interest payable - unearned revenue - note payable
credit balance - income statement - temporary - Revenue
similar to unearned revenue- liabilities

24. Current Assets
(cash - accts revievable - inventory) turn into cash within 12 months
Debit Balance - Income Statement - temporary - Expense
record adjusting entries to general journal
wages payable - utilities payable - interest payable - unearned revenue - note payable

25. NonCurrent Assets
(long-term) assets (building - land - equipment)
Payment x Rate x Time
Revenues and Expenses
a company uses the same method each year for calculating inventory

26. Interest Expense
Retained earnings beg. balance - Net income - dividends.
Credit balance - income statement - temporary - revenues
record adjusting entries to general journal
Debit Balance - Income Statement - temporary - Expense

27. Going Concern
to those willing to take time to understand it
credit balance - balance sheet - permanent - liabilities
Revenues-Expenses
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

28. Reliability
Payment x Rate x Time
the original amount to purchase land is verifiable through the contract documents
decrease equity - debit balance
longterm liabilities

29. Consistency
a company uses the same method each year for calculating inventory
post journal to general ledger
the original amount to purchase land is verifiable through the contract documents
longterm liabilities

30. 1st step of Accounting Cycle
debit balance - Balance sheet - permanent - asset
analyze transactions from external events
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.

31. Accts on Statement of Retained Earnings
credit balance - balance sheet - permanent - liabilities
Retained earnings beg. balance - Net income - dividends.
companies must reduce the value of land - if the value is lower than its original cost.
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

32. Economic Equity
Contra Asset - noncurrent asset
each owner has its own books - records - financial statements that are seperate.
copyright - long term assets - noncurrent
debit balance - balance sheet - permanent - asset

33. Relevance
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
debit balance - Balance sheet - permanent - asset
an appraised value for land gives additional information that is useful to investors
credit balance - balance sheet - permanent - liabilities

34. Interest Revenue
record adjusting entries to general journal
Credit balance - income statement - temporary - revenues
Credit Balance - Balance Sheet - permanent - liability
Debit Balance - Balance sheet - permanent - asset

35. Dividends
debit balance - income statement - temporary - expense
each owner has its own books - records - financial statements that are seperate.
Debit Balance - Retained Earnings - Temporary - Owners Equity
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

36. Cost of Goods Sold
prepare adjusted trial balance
record adjusting entries to general journal
Debit Balance - Income Statement - Temporary - expense
credit balance - balance sheet - permanent - liabilities

37. Building
Debit Balance - Income Statement - Temporary - expense
(cash - accts revievable - inventory) turn into cash within 12 months
decrease equity - debit balance
debit balance - Balance sheet - Permanent - asset

38. 3rd step of analyzing transactions
determine the direction of the effect. debit or credit
how we measure - assumes economic mean
prepar journal to general ledger
similar to unearned revenue- liabilities

39. Profit Margin %
wages payable - utilities payable - interest payable - unearned revenue - note payable
debit balance - balance sheet - permanent - asset
Net Income/Sales
analyze transactions from external events

40. 5th step of Accounting Cycle
record adjusting entries to general journal
how we measure - assumes economic mean
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Contra Asset - noncurrent asset

41. 8th step of Accounting Cycle
Payment x Rate x Time
(long-term) assets (building - land - equipment)
credit balance - income statement - temporary - Revenue
prepare financial statements

42. Monetary Unit
Assets - Liabilities - Equity
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
an appraised value for land gives additional information that is useful to investors

43. Calculating Cost depreciation
cost-salvage value/years of life
similar to unearned revenue- liabilities
Revenues and Expenses
copyright - long term assets - noncurrent

44. Cash Principle
debit balance - balance sheet - permanent - asset
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
similar to unearned revenue- liabilities
an appraised value for land gives additional information that is useful to investors

45. Understandability
debit balance - Balance sheet - Permanent - asset
credit balance - income statement - temporary - Revenue
to those willing to take time to understand it
prepare adjusted trial balance

46. 4th step of analyzing transactions
record adjusting entries to general journal
longterm liabilities
does the equation remain in balance?
debit balance - Balance sheet - Permanent - asset

47. Intangibles
Identify Accounts affected
prepare adjusted trial balance
decrease equity - debit balance
copyright - long term assets - noncurrent

48. Note Payable
Payment x Rate x Time
Credit Balance - Balance Sheet - permanent - liability
determine the direction of the effect. debit or credit
(cash - accts revievable - inventory) turn into cash within 12 months

49. Prepaid insurance
Credit Balance - Balance Sheet - permanent - liability
Debit Balance - Retained Earnings - Temporary - Owners Equity
credit balance - balance sheet - permanent - liabilities
debit balance - balance sheet - permanent - asset

50. Balance sheet Equity
Debit Balance - Balance sheet - permanent - asset
post journal to general ledger
to those willing to take time to understand it
Contributed Capital - Retained Earnings - Dividends