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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. 7th step of Accounting Cycle
prepare adjusted trial balance
an appraised value for land gives additional information that is useful to investors
Credit Balance - Balance Sheet - Permanent - owners equity
determine the direction of the effect. debit or credit

2. Relevance
prepare financial statements
Revenues and Expenses
an appraised value for land gives additional information that is useful to investors
Debit Balance - Balance sheet - permanent - asset

3. Economic Equity
credit balance - income statement - temporary - Revenue
to those willing to take time to understand it
each owner has its own books - records - financial statements that are seperate.
Debit Balance - Income Statement - Temporary - expense

4. NonCurrent Assets
Debit Balance - Balance sheet - permanent - asset
(long-term) assets (building - land - equipment)
Credit balance - income statement - temporary - revenues
copyright - long term assets - noncurrent

5. 3rd step of Accounting Cycle
prepar journal to general ledger
longterm liabilities
similar to unearned revenue- liabilities
Credit Balance - Balance Sheet - Permanent - owners equity

6. Materiality

7. Income Satement Expenses
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
prepare adjusted trial balance
credit balance - balance sheet - permanent - liabilities

8. 4th step of Accounting Cycle
to those willing to take time to understand it
prepare Unadjusted trial balance
prepare post-closing trial balance
does the equation remain in balance?

9. Accumlated depreciation
record adjusting entries to general journal
debit balance - income statement - temporary - expense
Contra Asset - noncurrent asset
Debit Balance - Income Statement - Temporary - expense

10. Retained Earnings
Credit balance - Balance sheet and Retained Earnings - Permanent
wages payable - utilities payable - interest payable - unearned revenue - note payable
Payment x Rate x Time
Retained earnings beg. balance - Net income - dividends.

11. Consistency
a company uses the same method each year for calculating inventory
how we measure - assumes economic mean
Close out all revenue and expense accounts into retained earnings.
Retained earnings beg. balance - Net income - dividends.

12. Building
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
longterm liabilities
Sales Revenues
debit balance - Balance sheet - Permanent - asset

13. 6th step of Accounting Cycle
Current Assets/Current Liabilities
Revenues-Expenses
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
post journal to general ledger

14. Current Ratio
does the equation remain in balance?
similar to unearned revenue- liabilities
Current Assets/Current Liabilities
Revenues-Expenses

15. Accts on Statement of Retained Earnings
Retained earnings beg. balance - Net income - dividends.
copyright - long term assets - noncurrent
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
determine the direction of the effect. debit or credit

16. Interest Revenue
Debit Balance - Income Statement - Temporary - expense
prepare adjusted trial balance
Credit balance - income statement - temporary - revenues
(cash - accts revievable - inventory) turn into cash within 12 months

17. Customer deposits
prepare adjusted trial balance
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
similar to unearned revenue- liabilities
the original amount to purchase land is verifiable through the contract documents

18. 2nd step of analyzing transactions
the original amount to purchase land is verifiable through the contract documents
Revenues and Expenses
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Contra Asset - noncurrent asset

19. Utilities expense
debit balance - Balance sheet - permanent - asset
an appraised value for land gives additional information that is useful to investors
Contra Asset - noncurrent asset
debit balance - income statement - temporary - expense

20. Accumulated depriciation
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.
credit balance - balance sheet - permanent - liabilities
how we measure - assumes economic mean

21. 5th step of Accounting Cycle
decrease equity - debit balance
a company uses the same method each year for calculating inventory
Credit Balance - Balance Sheet - Permanent - owners equity
record adjusting entries to general journal

22. Intangibles
Sales Revenues
cost-salvage value/years of life
copyright - long term assets - noncurrent
Contra Asset - noncurrent asset

23. Balance Sheet Liabilities
Retained earnings beg. balance - Net income - dividends.
similar to unearned revenue- liabilities
wages payable - utilities payable - interest payable - unearned revenue - note payable
Net Income/Sales

24. Accounts Recievable
prepare closing entry-post to general ledger
Debit Balance - Balance sheet - permanent - asset
does the equation remain in balance?
each owner has its own books - records - financial statements that are seperate.

25. 4th step of analyzing transactions
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Debit Balance - Income Statement - Temporary - expense
Retained earnings beg. balance - Net income - dividends.
does the equation remain in balance?

26. Prepaid insurance
(cash - accts revievable - inventory) turn into cash within 12 months
Retained earnings beg. balance - Net income - dividends.
debit balance - balance sheet - permanent - asset
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

27. Unearned revenue
Retained earnings beg. balance - Net income - dividends.
debit balance - balance sheet - permanent - asset
credit balance - balance sheet - permanent - liabilities
Credit balance - Balance sheet and Retained Earnings - Permanent

28. 1st step of Accounting Cycle
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
decrease equity - debit balance
analyze transactions from external events
(long-term) assets (building - land - equipment)

29. Conservatism
companies must reduce the value of land - if the value is lower than its original cost.
prepare post-closing trial balance
determine the direction of the effect. debit or credit
prepare closing entry-post to general ledger

30. Sales revenue
Identify Accounts affected
does the equation remain in balance?
Credit Balance - Balance Sheet - Permanent - owners equity
credit balance - income statement - temporary - Revenue

31. Calculating Net Income
debit balance - Balance sheet - Permanent - asset
a company uses the same method each year for calculating inventory
Revenues-Expenses
Payment x Rate x Time

32. 2nd step of Accounting Cycle
does the equation remain in balance?
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
record transactions in general journal
debit balance - income statement - temporary - expense

33. 3rd step of analyzing transactions
determine the direction of the effect. debit or credit
prepare financial statements
prepar journal to general ledger
the original amount to purchase land is verifiable through the contract documents

34. NonCurrent Liabilities
longterm liabilities
Identify Accounts affected
debit balance - income statement - temporary - expense
Credit Balance - Balance Sheet - permanent - liability

35. Accts on balance sheet
copyright - long term assets - noncurrent
Credit balance - income statement - temporary - revenues
Assets - Liabilities - Equity
analyze transactions from external events

36. Accounting Equation
prepare adjusted trial balance
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
prepar journal to general ledger
credit balance - balance sheet - permanent - liabilities

37. 9th step of Accounting Cycle
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
longterm liabilities
prepare closing entry-post to general ledger

38. Monetary Unit
(cash - accts revievable - inventory) turn into cash within 12 months
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
how we measure - assumes economic mean
determine the direction of the effect. debit or credit

39. 8th step of Accounting Cycle
debit balance - income statement - temporary - expense
Revenues and Expenses
(cash - accts revievable - inventory) turn into cash within 12 months
prepare financial statements

40. Income Statement Revenues
Sales Revenues
a company uses the same method each year for calculating inventory
Payment x Rate x Time
longterm liabilities

41. Balance Sheet Assets
a company uses the same method each year for calculating inventory
debit balance - income statement - temporary - expense
Sales Revenues
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

42. Dividends
Debit Balance - Retained Earnings - Temporary - Owners Equity
longterm liabilities
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
analyze transactions from external events

43. Note Payable
an appraised value for land gives additional information that is useful to investors
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Credit Balance - Balance Sheet - permanent - liability
Credit balance - Balance sheet and Retained Earnings - Permanent

44. Dividends
how we measure - assumes economic mean
decrease equity - debit balance
Revenues-Expenses
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

45. 1st Step of Analying Transactions
Identify Accounts affected
how we measure - assumes economic mean
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Close out all revenue and expense accounts into retained earnings.

46. Closing Entries
record transactions in general journal
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
debit balance - Balance sheet - permanent - asset
Close out all revenue and expense accounts into retained earnings.

47. Current Assets
Debit Balance - Balance sheet - permanent - asset
Net Income/Sales
how we measure - assumes economic mean
(cash - accts revievable - inventory) turn into cash within 12 months

48. Profit Margin %
Debit Balance - Balance sheet - permanent - asset
Net Income/Sales
prepare closing entry-post to general ledger
prepare financial statements

49. Calculating Cost depreciation
cost-salvage value/years of life
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
debit balance - balance sheet - permanent - asset
Contributed Capital - Retained Earnings - Dividends

50. Cost of Goods Sold
debit balance - balance sheet - permanent - asset
the original amount to purchase land is verifiable through the contract documents
prepare Unadjusted trial balance
Debit Balance - Income Statement - Temporary - expense