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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. Cash Principle
credit balance - balance sheet - permanent - liabilities
(cash - accts revievable - inventory) turn into cash within 12 months
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
does the equation remain in balance?

2. Calculating Cost depreciation
how we measure - assumes economic mean
Credit Balance - Balance Sheet - permanent - liability
cost-salvage value/years of life
Credit balance - Balance sheet and Retained Earnings - Permanent

3. Accounting Equation
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Identify Accounts affected
analyze transactions from external events
Net Income/Sales

4. 9th step of Accounting Cycle
prepare closing entry-post to general ledger
companies must reduce the value of land - if the value is lower than its original cost.
prepar journal to general ledger
prepare financial statements

5. Dividends
credit balance - income statement - temporary - Revenue
Retained earnings beg. balance - Net income - dividends.
Debit Balance - Retained Earnings - Temporary - Owners Equity
to those willing to take time to understand it

6. Intangibles
the original amount to purchase land is verifiable through the contract documents
copyright - long term assets - noncurrent
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
credit balance - income statement - temporary - Revenue

7. 1st step of Accounting Cycle
debit balance - Balance sheet - permanent - asset
credit balance - balance sheet - permanent - liabilities
analyze transactions from external events
debit balance - Balance sheet - Permanent - asset

8. Utilities expense
Revenues and Expenses
debit balance - income statement - temporary - expense
wages payable - utilities payable - interest payable - unearned revenue - note payable
how we measure - assumes economic mean

9. Accounts Recievable
prepar journal to general ledger
Debit Balance - Balance sheet - permanent - asset
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

10. 6th step of Accounting Cycle
post journal to general ledger
determine the direction of the effect. debit or credit
debit balance - income statement - temporary - expense
Net Income/Sales

11. 4th step of Accounting Cycle
Assets - Liabilities - Equity
debit balance - Balance sheet - permanent - asset
decrease equity - debit balance
prepare Unadjusted trial balance

12. Materiality

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13. Accumlated depreciation
credit balance - balance sheet - permanent - liabilities
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
cost-salvage value/years of life
Contra Asset - noncurrent asset

14. 3rd step of analyzing transactions
(cash - accts revievable - inventory) turn into cash within 12 months
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
determine the direction of the effect. debit or credit
Debit Balance - Income Statement - Temporary - expense

15. Goodwill
debit balance - balance sheet - permanent - asset
Contra Asset - noncurrent asset
each owner has its own books - records - financial statements that are seperate.
debit balance - income statement - temporary - expense

16. 2nd step of analyzing transactions
Debit Balance - Income Statement - Temporary - expense
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Net Income/Sales

17. Unearned revenue
the original amount to purchase land is verifiable through the contract documents
copyright - long term assets - noncurrent
credit balance - balance sheet - permanent - liabilities
debit balance - Balance sheet - Permanent - asset

18. Accounts on Income Statement
Revenues and Expenses
Assets - Liabilities - Equity
credit balance - income statement - temporary - Revenue
credit balance - balance sheet - permanent - liabilities

19. 1st Step of Analying Transactions
Retained earnings beg. balance - Net income - dividends.
wages payable - utilities payable - interest payable - unearned revenue - note payable
debit balance - Balance sheet - Permanent - asset
Identify Accounts affected

20. Current Ratio
debit balance - balance sheet - permanent - asset
Current Assets/Current Liabilities
prepare Unadjusted trial balance
cost-salvage value/years of life

21. 3rd step of Accounting Cycle
how we measure - assumes economic mean
prepar journal to general ledger
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
each owner has its own books - records - financial statements that are seperate.

22. Customer deposits
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
similar to unearned revenue- liabilities
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

23. Monetary Unit
record transactions in general journal
(cash - accts revievable - inventory) turn into cash within 12 months
how we measure - assumes economic mean
Debit Balance - Retained Earnings - Temporary - Owners Equity

24. Cost of Goods Sold
Debit Balance - Income Statement - Temporary - expense
companies must reduce the value of land - if the value is lower than its original cost.
longterm liabilities
Revenues-Expenses

25. Balance Sheet Liabilities
wages payable - utilities payable - interest payable - unearned revenue - note payable
analyze transactions from external events
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
debit balance - income statement - temporary - expense

26. Economic Equity
the original amount to purchase land is verifiable through the contract documents
analyze transactions from external events
how we measure - assumes economic mean
each owner has its own books - records - financial statements that are seperate.

27. 4th step of analyzing transactions
prepare financial statements
does the equation remain in balance?
Revenues and Expenses
prepar journal to general ledger

28. Reliability
the original amount to purchase land is verifiable through the contract documents
Identify Accounts affected
a company uses the same method each year for calculating inventory
credit balance - balance sheet - permanent - liabilities

29. Accumulated depriciation
credit balance - balance sheet - permanent - liabilities
an appraised value for land gives additional information that is useful to investors
Credit Balance - Balance Sheet - permanent - liability
Debit Balance - Retained Earnings - Temporary - Owners Equity

30. 2nd step of Accounting Cycle
Debit Balance - Balance sheet - permanent - asset
record transactions in general journal
debit balance - Balance sheet - Permanent - asset
decrease equity - debit balance

31. Profit Margin %
how we measure - assumes economic mean
Net Income/Sales
Debit Balance - Balance sheet - permanent - asset
debit balance - balance sheet - permanent - asset

32. Common Stock
Credit Balance - Balance Sheet - Permanent - owners equity
credit balance - balance sheet - permanent - liabilities
cost-salvage value/years of life
prepare adjusted trial balance

33. 8th step of Accounting Cycle
prepare financial statements
debit balance - Balance sheet - permanent - asset
copyright - long term assets - noncurrent
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

34. Dividends
Revenues and Expenses
decrease equity - debit balance
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
Credit balance - Balance sheet and Retained Earnings - Permanent

35. Inventory
prepare Unadjusted trial balance
Identify Accounts affected
debit balance - Balance sheet - permanent - asset
Credit Balance - Balance Sheet - Permanent - owners equity

36. NonCurrent Assets
(long-term) assets (building - land - equipment)
debit balance - Balance sheet - permanent - asset
prepar journal to general ledger
Contributed Capital - Retained Earnings - Dividends

37. 7th step of Accounting Cycle
debit balance - balance sheet - permanent - asset
an appraised value for land gives additional information that is useful to investors
Identify Accounts affected
prepare adjusted trial balance

38. Interest Expense
Debit Balance - Income Statement - temporary - Expense
Identify Accounts affected
prepar journal to general ledger
similar to unearned revenue- liabilities

39. Current Assets
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
(cash - accts revievable - inventory) turn into cash within 12 months
Credit balance - income statement - temporary - revenues
a company uses the same method each year for calculating inventory

40. Calculating Interest Formula
Payment x Rate x Time
Debit Balance - Balance sheet - permanent - asset
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
how we measure - assumes economic mean

41. Building
companies must reduce the value of land - if the value is lower than its original cost.
similar to unearned revenue- liabilities
debit balance - Balance sheet - Permanent - asset
Net Income/Sales

42. Note Payable
Credit Balance - Balance Sheet - permanent - liability
credit balance - income statement - temporary - Revenue
each owner has its own books - records - financial statements that are seperate.
Close out all revenue and expense accounts into retained earnings.

43. Going Concern
credit balance - balance sheet - permanent - liabilities
debit balance - balance sheet - permanent - asset
record transactions in general journal
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

44. 10th step of Accounting Cycle
similar to unearned revenue- liabilities
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
prepare post-closing trial balance
record transactions in general journal

45. 5th step of Accounting Cycle
post journal to general ledger
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
how we measure - assumes economic mean
record adjusting entries to general journal

46. NonCurrent Liabilities
longterm liabilities
similar to unearned revenue- liabilities
how we measure - assumes economic mean
Retained earnings beg. balance - Net income - dividends.

47. Relevance
cost-salvage value/years of life
analyze transactions from external events
an appraised value for land gives additional information that is useful to investors
Revenues and Expenses

48. Prepaid insurance
debit balance - balance sheet - permanent - asset
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Credit Balance - Balance Sheet - Permanent - owners equity
analyze transactions from external events

49. Accts on Statement of Retained Earnings
Retained earnings beg. balance - Net income - dividends.
determine the direction of the effect. debit or credit
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
companies must reduce the value of land - if the value is lower than its original cost.

50. Balance Sheet Assets
copyright - long term assets - noncurrent
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
how we measure - assumes economic mean
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>