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Business Accounting Basics

Instructions:

Answer 50 questions in 15 minutes.
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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. Reliability
the original amount to purchase land is verifiable through the contract documents
Close out all revenue and expense accounts into retained earnings.
Net Income/Sales
(long-term) assets (building - land - equipment)

2. Cash Principle
prepar journal to general ledger
(long-term) assets (building - land - equipment)
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.

3. 5th step of Accounting Cycle
record adjusting entries to general journal
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
debit balance - balance sheet - permanent - asset
similar to unearned revenue- liabilities

4. Calculating Net Income
debit balance - balance sheet - permanent - asset
Identify Accounts affected
Revenues-Expenses
credit balance - income statement - temporary - Revenue

5. Note Payable
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
debit balance - income statement - temporary - expense
Credit Balance - Balance Sheet - permanent - liability
Contributed Capital - Retained Earnings - Dividends

6. Accumulated depriciation
cost-salvage value/years of life
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
credit balance - balance sheet - permanent - liabilities
record adjusting entries to general journal

7. 2nd step of analyzing transactions
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
post journal to general ledger
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
prepar journal to general ledger

8. 4th step of analyzing transactions
decrease equity - debit balance
post journal to general ledger
does the equation remain in balance?
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

9. Goodwill
debit balance - balance sheet - permanent - asset
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
analyze transactions from external events
prepar journal to general ledger

10. Monetary Unit
Current Assets/Current Liabilities
record adjusting entries to general journal
Sales Revenues
how we measure - assumes economic mean

11. Calculating Interest Formula
companies must reduce the value of land - if the value is lower than its original cost.
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
Payment x Rate x Time
Close out all revenue and expense accounts into retained earnings.

12. 3rd step of Accounting Cycle
prepar journal to general ledger
debit balance - balance sheet - permanent - asset
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Debit Balance - Income Statement - temporary - Expense

13. Dividends
debit balance - income statement - temporary - expense
(cash - accts revievable - inventory) turn into cash within 12 months
Contra Asset - noncurrent asset
decrease equity - debit balance

14. NonCurrent Assets
a company uses the same method each year for calculating inventory
decrease equity - debit balance
post journal to general ledger
(long-term) assets (building - land - equipment)

15. 7th step of Accounting Cycle
record transactions in general journal
prepare adjusted trial balance
Net Income/Sales
debit balance - Balance sheet - permanent - asset

16. Current Ratio
Current Assets/Current Liabilities
Net Income/Sales
Contributed Capital - Retained Earnings - Dividends
prepare adjusted trial balance

17. Materiality
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
Net Income/Sales
post journal to general ledger
Assets - Liabilities - Equity

18. Prepaid insurance
debit balance - balance sheet - permanent - asset
does the equation remain in balance?
Net Income/Sales
Assets - Liabilities - Equity

19. Interest Revenue
post journal to general ledger
Credit balance - income statement - temporary - revenues
(long-term) assets (building - land - equipment)
analyze transactions from external events

20. 3rd step of analyzing transactions
Revenues and Expenses
cost-salvage value/years of life
determine the direction of the effect. debit or credit
credit balance - balance sheet - permanent - liabilities

21. Profit Margin %
Net Income/Sales
Revenues-Expenses
Credit Balance - Balance Sheet - Permanent - owners equity
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

22. Balance sheet Equity
(cash - accts revievable - inventory) turn into cash within 12 months
Revenues-Expenses
debit balance - balance sheet - permanent - asset
Contributed Capital - Retained Earnings - Dividends

23. Income Statement Revenues
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Sales Revenues
Payment x Rate x Time
prepare adjusted trial balance

24. Interest Expense
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Debit Balance - Income Statement - temporary - Expense
(long-term) assets (building - land - equipment)
(cash - accts revievable - inventory) turn into cash within 12 months

25. NonCurrent Liabilities
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
longterm liabilities
how we measure - assumes economic mean
Assets - Liabilities - Equity

26. Common Stock
debit balance - Balance sheet - permanent - asset
wages payable - utilities payable - interest payable - unearned revenue - note payable
prepare Unadjusted trial balance
Credit Balance - Balance Sheet - Permanent - owners equity

27. 10th step of Accounting Cycle
similar to unearned revenue- liabilities
prepare post-closing trial balance
Net Income/Sales
debit balance - balance sheet - permanent - asset

28. 9th step of Accounting Cycle
prepare closing entry-post to general ledger
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
how we measure - assumes economic mean
copyright - long term assets - noncurrent

29. Accounting Equation
post journal to general ledger
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
copyright - long term assets - noncurrent
record adjusting entries to general journal

30. Dividends
prepare Unadjusted trial balance
credit balance - balance sheet - permanent - liabilities
companies must reduce the value of land - if the value is lower than its original cost.
Debit Balance - Retained Earnings - Temporary - Owners Equity

31. Accumlated depreciation
Contra Asset - noncurrent asset
Assets - Liabilities - Equity
debit balance - income statement - temporary - expense
Sales Revenues

32. 1st Step of Analying Transactions
an appraised value for land gives additional information that is useful to investors
Identify Accounts affected
how we measure - assumes economic mean
record transactions in general journal

33. Economic Equity
prepare closing entry-post to general ledger
each owner has its own books - records - financial statements that are seperate.
Credit Balance - Balance Sheet - permanent - liability
the original amount to purchase land is verifiable through the contract documents

34. Accts on balance sheet
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Assets - Liabilities - Equity
Current Assets/Current Liabilities

35. 6th step of Accounting Cycle
Debit Balance - Balance sheet - permanent - asset
Identify Accounts affected
post journal to general ledger
to those willing to take time to understand it

36. Closing Entries
(long-term) assets (building - land - equipment)
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Close out all revenue and expense accounts into retained earnings.
Revenues and Expenses

37. Inventory
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
credit balance - balance sheet - permanent - liabilities
debit balance - Balance sheet - permanent - asset

38. Consistency
copyright - long term assets - noncurrent
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 - Balance sheet and Retained Earnings - Permanent
a company uses the same method each year for calculating inventory

39. Cost of Goods Sold
record adjusting entries to general journal
post journal to general ledger
record transactions in general journal
Debit Balance - Income Statement - Temporary - expense

40. Utilities expense
debit balance - income statement - temporary - expense
how we measure - assumes economic mean
(long-term) assets (building - land - equipment)
record adjusting entries to general journal

41. Retained Earnings
prepar journal to general ledger
prepare closing entry-post to general ledger
a company uses the same method each year for calculating inventory
Credit balance - Balance sheet and Retained Earnings - Permanent

42. Balance Sheet Assets
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
prepare post-closing trial balance
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

43. 1st step of Accounting Cycle
analyze transactions from external events
Revenues and Expenses
a company uses the same method each year for calculating inventory
cost-salvage value/years of life

44. Multistep Income Statement
debit balance - income statement - temporary - expense
record transactions in general journal
Sales Revenues
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income

45. 2nd step of Accounting Cycle
credit balance - income statement - temporary - Revenue
record transactions in general journal
prepare financial statements
Debit Balance - Balance sheet - permanent - asset

46. Customer deposits
a company uses the same method each year for calculating inventory
similar to unearned revenue- liabilities
copyright - long term assets - noncurrent
debit balance - balance sheet - permanent - asset

47. Unearned revenue
credit balance - balance sheet - permanent - liabilities
Contra Asset - noncurrent asset
Retained earnings beg. balance - Net income - dividends.
Credit Balance - Balance Sheet - Permanent - owners equity

48. Sales revenue
credit balance - income statement - temporary - Revenue
determine the direction of the effect. debit or credit
prepare closing entry-post to general ledger
record adjusting entries to general journal

49. Current Assets
does the equation remain in balance?
debit balance - balance sheet - permanent - asset
Identify Accounts affected
(cash - accts revievable - inventory) turn into cash within 12 months

50. Accounts Recievable
Credit Balance - Balance Sheet - permanent - liability
Debit Balance - Balance sheet - permanent - asset
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

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Business Accounting Basics

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