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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. Unearned revenue
Current Assets/Current Liabilities
credit balance - balance sheet - permanent - liabilities
Revenues and Expenses
debit balance - Balance sheet - Permanent - asset

2. Multistep Income Statement
prepare post-closing trial balance
companies must reduce the value of land - if the value is lower than its original cost.
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

3. 3rd step of analyzing transactions
similar to unearned revenue- liabilities
determine the direction of the effect. debit or credit
Credit balance - Balance sheet and Retained Earnings - Permanent
credit balance - balance sheet - permanent - liabilities

4. Income Statement Revenues
Credit balance - income statement - temporary - revenues
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Sales Revenues
prepare closing entry-post to general ledger

5. NonCurrent Assets
(long-term) assets (building - land - equipment)
Credit balance - Balance sheet and Retained Earnings - Permanent
a company uses the same method each year for calculating inventory
Contributed Capital - Retained Earnings - Dividends

6. Retained Earnings
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
does the equation remain in balance?
prepare financial statements
Credit balance - Balance sheet and Retained Earnings - Permanent

7. Accounts Recievable
Debit Balance - Balance sheet - permanent - asset
credit balance - balance sheet - permanent - liabilities
prepare Unadjusted trial balance
credit balance - income statement - temporary - Revenue

8. Economic Equity
longterm liabilities
Contributed Capital - Retained Earnings - Dividends
wages payable - utilities payable - interest payable - unearned revenue - note payable
each owner has its own books - records - financial statements that are seperate.

9. NonCurrent Liabilities
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
longterm liabilities
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

10. Calculating Net Income
an appraised value for land gives additional information that is useful to investors
credit balance - income statement - temporary - Revenue
Revenues-Expenses
longterm liabilities

11. Accts on balance sheet
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.
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Assets - Liabilities - Equity

12. Current Assets
(cash - accts revievable - inventory) turn into cash within 12 months
determine the direction of the effect. debit or credit
Contra Asset - noncurrent asset
Net Income/Sales

13. 10th step of Accounting Cycle
credit balance - balance sheet - permanent - liabilities
debit balance - Balance sheet - Permanent - asset
Contributed Capital - Retained Earnings - Dividends
prepare post-closing trial balance

14. Dividends
record transactions in general journal
decrease equity - debit balance
debit balance - Balance sheet - permanent - asset
analyze transactions from external events

15. 1st Step of Analying Transactions
decrease equity - debit balance
credit balance - income statement - temporary - Revenue
Debit Balance - Income Statement - Temporary - expense
Identify Accounts affected

16. Interest Expense
Debit Balance - Income Statement - temporary - Expense
does the equation remain in balance?
an appraised value for land gives additional information that is useful to investors
Revenues-Expenses

17. Income Satement Expenses
prepare closing entry-post to general ledger
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
(cash - accts revievable - inventory) turn into cash within 12 months
decrease equity - debit balance

18. 4th step of Accounting Cycle
prepare Unadjusted trial balance
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.
Sales Revenues

19. 9th step of Accounting Cycle
(long-term) assets (building - land - equipment)
prepare closing entry-post to general ledger
debit balance - balance sheet - permanent - asset
credit balance - income statement - temporary - Revenue

20. Utilities expense
Current Assets/Current Liabilities
Contributed Capital - Retained Earnings - Dividends
Credit Balance - Balance Sheet - Permanent - owners equity
debit balance - income statement - temporary - expense

21. 2nd step of analyzing transactions
prepare Unadjusted trial balance
wages payable - utilities payable - interest payable - unearned revenue - note payable
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Revenues and Expenses

22. Customer deposits
determine the direction of the effect. debit or credit
Debit Balance - Retained Earnings - Temporary - Owners Equity
similar to unearned revenue- liabilities
(cash - accts revievable - inventory) turn into cash within 12 months

23. 7th step of Accounting Cycle
Revenues and Expenses
Identify Accounts affected
(cash - accts revievable - inventory) turn into cash within 12 months
prepare adjusted trial balance

24. Inventory
determine the direction of the effect. debit or credit
debit balance - Balance sheet - permanent - asset
Revenues and Expenses
similar to unearned revenue- liabilities

25. Relevance
prepar journal to general ledger
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
an appraised value for land gives additional information that is useful to investors
(cash - accts revievable - inventory) turn into cash within 12 months

26. Balance sheet Equity
Contributed Capital - Retained Earnings - Dividends
a company uses the same method each year for calculating inventory
Contra Asset - noncurrent asset
how we measure - assumes economic mean

27. Accounting Equation
prepare Unadjusted trial balance
prepare post-closing trial balance
Current Assets/Current Liabilities
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

28. 8th step of Accounting Cycle
does the equation remain in balance?
Credit Balance - Balance Sheet - permanent - liability
prepare financial statements
Revenues and Expenses

29. Accumlated depreciation
Contra Asset - noncurrent asset
Close out all revenue and expense accounts into retained earnings.
debit balance - income statement - temporary - expense
Revenues-Expenses

30. Note Payable
prepare post-closing trial balance
Credit Balance - Balance Sheet - permanent - liability
credit balance - income statement - temporary - Revenue
(cash - accts revievable - inventory) turn into cash within 12 months

31. Building
analyze transactions from external events
debit balance - Balance sheet - Permanent - asset
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
(cash - accts revievable - inventory) turn into cash within 12 months

32. Understandability
debit balance - Balance sheet - Permanent - asset
determine the direction of the effect. debit or credit
Debit Balance - Balance sheet - permanent - asset
to those willing to take time to understand it

33. Calculating Cost depreciation
credit balance - balance sheet - permanent - liabilities
cost-salvage value/years of life
Contributed Capital - Retained Earnings - Dividends
Assets - Liabilities - Equity

34. Balance Sheet Liabilities
wages payable - utilities payable - interest payable - unearned revenue - note payable
Assets - Liabilities - Equity
Close out all revenue and expense accounts into retained earnings.
cost-salvage value/years of life

35. Closing Entries
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Close out all revenue and expense accounts into retained earnings.
Retained earnings beg. balance - Net income - dividends.
copyright - long term assets - noncurrent

36. Going Concern
determine the direction of the effect. debit or credit
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
how we measure - assumes economic mean
Current Assets/Current Liabilities

37. Conservatism
Contra Asset - noncurrent asset
debit balance - balance sheet - permanent - asset
companies must reduce the value of land - if the value is lower than its original cost.
Credit balance - Balance sheet and Retained Earnings - Permanent

38. Materiality

39. Profit Margin %
debit balance - Balance sheet - permanent - asset
Net Income/Sales
wages payable - utilities payable - interest payable - unearned revenue - note payable
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

40. Sales revenue
Contra Asset - noncurrent asset
decrease equity - debit balance
Revenues-Expenses
credit balance - income statement - temporary - Revenue

41. Accounts on Income Statement
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.
Credit balance - income statement - temporary - revenues
Revenues and Expenses

42. Prepaid insurance
prepare financial statements
debit balance - balance sheet - permanent - asset
Debit Balance - Income Statement - Temporary - expense
does the equation remain in balance?

43. Accumulated depriciation
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
credit balance - balance sheet - permanent - liabilities
an appraised value for land gives additional information that is useful to investors
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

44. Interest Revenue
similar to unearned revenue- liabilities
prepare closing entry-post to general ledger
Credit Balance - Balance Sheet - Permanent - owners equity
Credit balance - income statement - temporary - revenues

45. Calculating Interest Formula
the original amount to purchase land is verifiable through the contract documents
Payment x Rate x Time
Debit Balance - Income Statement - temporary - Expense
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

46. 2nd step of Accounting Cycle
Identify Accounts affected
Credit balance - Balance sheet and Retained Earnings - Permanent
record transactions in general journal
companies must reduce the value of land - if the value is lower than its original cost.

47. Common Stock
Retained earnings beg. balance - Net income - dividends.
Credit Balance - Balance Sheet - Permanent - owners equity
record adjusting entries to general journal
Revenues-Expenses

48. Balance Sheet Assets
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
longterm liabilities
credit balance - income statement - temporary - Revenue
Debit Balance - Income Statement - temporary - Expense

49. Reliability
post journal to general ledger
credit balance - balance sheet - permanent - liabilities
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
the original amount to purchase land is verifiable through the contract documents

50. Cost of Goods Sold
debit balance - balance sheet - permanent - asset
Debit Balance - Income Statement - Temporary - expense
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
Close out all revenue and expense accounts into retained earnings.