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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. Conservatism
companies must reduce the value of land - if the value is lower than its original cost.
Revenues and Expenses
a company uses the same method each year for calculating inventory
how we measure - assumes economic mean

2. Income Statement Revenues
Debit Balance - Balance sheet - permanent - asset
prepare Unadjusted trial balance
debit balance - balance sheet - permanent - asset
Sales Revenues

3. Retained Earnings
Credit balance - Balance sheet and Retained Earnings - Permanent
Revenues-Expenses
record adjusting entries to general journal
(cash - accts revievable - inventory) turn into cash within 12 months

4. Accounts Recievable
Debit Balance - Balance sheet - permanent - asset
Contra Asset - noncurrent asset
prepar journal to general ledger
Credit balance - income statement - temporary - revenues

5. Accounting Equation
Payment x Rate x Time
Debit Balance - Income Statement - Temporary - expense
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.

6. Inventory
record transactions in general journal
Payment x Rate x Time
(long-term) assets (building - land - equipment)
debit balance - Balance sheet - permanent - asset

7. Customer deposits
post journal to general ledger
Credit Balance - Balance Sheet - permanent - liability
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.

8. Utilities expense
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
debit balance - balance sheet - permanent - asset
debit balance - income statement - temporary - expense
Credit balance - income statement - temporary - revenues

9. Accumlated depreciation
to those willing to take time to understand it
Contra Asset - noncurrent asset
prepar journal to general ledger
Credit Balance - Balance Sheet - Permanent - owners equity

10. Building
Contributed Capital - Retained Earnings - Dividends
the original amount to purchase land is verifiable through the contract documents
Credit balance - income statement - temporary - revenues
debit balance - Balance sheet - Permanent - asset

11. 3rd step of Accounting Cycle
companies must reduce the value of land - if the value is lower than its original cost.
prepar journal to general ledger
Credit Balance - Balance Sheet - Permanent - owners equity
post journal to general ledger

12. Current Assets
Identify Accounts affected
Debit Balance - Income Statement - Temporary - expense
how we measure - assumes economic mean
(cash - accts revievable - inventory) turn into cash within 12 months

13. Accounts on Income Statement
Credit Balance - Balance Sheet - Permanent - owners equity
post journal to general ledger
Revenues and Expenses
prepar journal to general ledger

14. Sales revenue
companies must reduce the value of land - if the value is lower than its original cost.
Contra Asset - noncurrent asset
Debit Balance - Balance sheet - permanent - asset
credit balance - income statement - temporary - Revenue

15. Closing Entries
debit balance - Balance sheet - Permanent - asset
companies must reduce the value of land - if the value is lower than its original cost.
determine the direction of the effect. debit or credit
Close out all revenue and expense accounts into retained earnings.

16. Going Concern
prepare Unadjusted trial balance
wages payable - utilities payable - interest payable - unearned revenue - note payable
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Revenues-Expenses

17. Calculating Cost depreciation
cost-salvage value/years of life
Net Income/Sales
analyze transactions from external events
Credit Balance - Balance Sheet - Permanent - owners equity

18. Accts on Statement of Retained Earnings
(long-term) assets (building - land - equipment)
Retained earnings beg. balance - Net income - dividends.
credit balance - balance sheet - permanent - liabilities
debit balance - Balance sheet - permanent - asset

19. Current Ratio
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
debit balance - balance sheet - permanent - asset
Current Assets/Current Liabilities
prepar journal to general ledger

20. 6th step of Accounting Cycle
similar to unearned revenue- liabilities
post journal to general ledger
Contra Asset - noncurrent asset
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

21. Materiality

22. Reliability
prepare post-closing trial balance
(long-term) assets (building - land - equipment)
the original amount to purchase land is verifiable through the contract documents
debit balance - balance sheet - permanent - asset

23. 5th step of Accounting Cycle
debit balance - balance sheet - permanent - asset
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
record adjusting entries to general journal
Identify Accounts affected

24. 4th step of analyzing transactions
decrease equity - debit balance
does the equation remain in balance?
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Revenues-Expenses

25. Understandability
post journal to general ledger
debit balance - Balance sheet - Permanent - asset
to those willing to take time to understand it
(cash - accts revievable - inventory) turn into cash within 12 months

26. Interest Expense
the original amount to purchase land is verifiable through the contract documents
how we measure - assumes economic mean
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.

27. Relevance
debit balance - balance sheet - permanent - asset
analyze transactions from external events
Assets - Liabilities - Equity
an appraised value for land gives additional information that is useful to investors

28. Dividends
debit balance - balance sheet - permanent - asset
debit balance - balance sheet - permanent - asset
Debit Balance - Retained Earnings - Temporary - Owners Equity
decrease equity - debit balance

29. Balance Sheet Liabilities
Sales Revenues
debit balance - balance sheet - permanent - asset
Assets - Liabilities - Equity
wages payable - utilities payable - interest payable - unearned revenue - note payable

30. 7th step of Accounting Cycle
debit balance - balance sheet - permanent - asset
how we measure - assumes economic mean
to those willing to take time to understand it
prepare adjusted trial balance

31. Calculating Interest Formula
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
Payment x Rate x Time
record transactions in general journal

32. Multistep Income Statement
analyze transactions from external events
Assets - Liabilities - Equity
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
prepare Unadjusted trial balance

33. Goodwill
debit balance - balance sheet - permanent - asset
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.
each owner has its own books - records - financial statements that are seperate.

34. Economic Equity
prepare Unadjusted trial balance
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
each owner has its own books - records - financial statements that are seperate.
an appraised value for land gives additional information that is useful to investors

35. Prepaid insurance
debit balance - balance sheet - permanent - asset
Payment x Rate x Time
Contra Asset - noncurrent asset
credit balance - income statement - temporary - Revenue

36. Cost of Goods Sold
debit balance - Balance sheet - permanent - asset
cost-salvage value/years of life
Debit Balance - Income Statement - Temporary - expense
an appraised value for land gives additional information that is useful to investors

37. 2nd step of Accounting Cycle
Close out all revenue and expense accounts into retained earnings.
how we measure - assumes economic mean
debit balance - balance sheet - permanent - asset
record transactions in general journal

38. NonCurrent Assets
debit balance - balance sheet - permanent - asset
record transactions in general journal
(long-term) assets (building - land - equipment)
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

39. Note Payable
Credit Balance - Balance Sheet - permanent - liability
record transactions in general journal
copyright - long term assets - noncurrent
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

40. Balance Sheet Assets
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Payment x Rate x Time
debit balance - income statement - temporary - expense
debit balance - Balance sheet - permanent - asset

41. 3rd step of analyzing transactions
Retained earnings beg. balance - Net income - dividends.
determine the direction of the effect. debit or credit
longterm liabilities
Credit balance - Balance sheet and Retained Earnings - Permanent

42. 2nd step of analyzing transactions
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Credit balance - income statement - temporary - revenues
prepare adjusted trial balance
wages payable - utilities payable - interest payable - unearned revenue - note payable

43. 10th step of Accounting Cycle
prepare post-closing trial balance
copyright - long term assets - noncurrent
determine the direction of the effect. debit or credit
decrease equity - debit balance

44. Profit Margin %
(long-term) assets (building - land - equipment)
prepare Unadjusted trial balance
the original amount to purchase land is verifiable through the contract documents
Net Income/Sales

45. 1st step of Accounting Cycle
record adjusting entries to general journal
credit balance - balance sheet - permanent - liabilities
prepare post-closing trial balance
analyze transactions from external events

46. 4th step of Accounting Cycle
Identify Accounts affected
Revenues-Expenses
prepare Unadjusted trial balance
prepare closing entry-post to general ledger

47. Monetary Unit
how we measure - assumes economic mean
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
credit balance - balance sheet - permanent - liabilities

48. Intangibles
copyright - long term assets - noncurrent
decrease equity - debit balance
determine the direction of the effect. debit or credit
prepare Unadjusted trial balance

49. Calculating Net Income
Revenues and Expenses
an appraised value for land gives additional information that is useful to investors
debit balance - Balance sheet - permanent - asset
Revenues-Expenses

50. Unearned revenue
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 - permanent - liabilities
prepare post-closing trial balance
to those willing to take time to understand it