Test your basic knowledge |

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. Current Ratio
copyright - long term assets - noncurrent
determine the direction of the effect. debit or credit
Current Assets/Current Liabilities
Credit balance - income statement - temporary - revenues

2. Balance Sheet Liabilities
a company uses the same method each year for calculating inventory
wages payable - utilities payable - interest payable - unearned revenue - note payable
prepare closing entry-post to general ledger
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income

3. 6th step of Accounting Cycle
post journal to general ledger
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
credit balance - balance sheet - permanent - liabilities
determine the direction of the effect. debit or credit

4. 2nd step of analyzing transactions
each owner has its own books - records - financial statements that are seperate.
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
debit balance - Balance sheet - Permanent - asset

5. Prepaid insurance
Net Income/Sales
Contra Asset - noncurrent asset
Credit Balance - Balance Sheet - Permanent - owners equity
debit balance - balance sheet - permanent - asset

6. 2nd step of Accounting Cycle
record transactions in general journal
prepar journal to general ledger
Debit Balance - Income Statement - temporary - 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.

7. Interest Expense
Debit Balance - Retained Earnings - Temporary - Owners Equity
Credit balance - income statement - temporary - revenues
Debit Balance - Income Statement - temporary - Expense
each owner has its own books - records - financial statements that are seperate.

8. Inventory
Payment x Rate x Time
prepare adjusted trial balance
debit balance - Balance sheet - permanent - asset
credit balance - balance sheet - permanent - liabilities

9. Note Payable
Credit Balance - Balance Sheet - permanent - liability
cost-salvage value/years of life
a company uses the same method each year for calculating inventory
decrease equity - debit balance

10. 8th step of Accounting Cycle
companies must reduce the value of land - if the value is lower than its original cost.
each owner has its own books - records - financial statements that are seperate.
to those willing to take time to understand it
prepare financial statements

11. Goodwill
record adjusting entries to general journal
Credit Balance - Balance Sheet - Permanent - owners equity
cost-salvage value/years of life
debit balance - balance sheet - permanent - asset

12. Dividends
Net Income/Sales
similar to unearned revenue- liabilities
Debit Balance - Income Statement - Temporary - expense
Debit Balance - Retained Earnings - Temporary - Owners Equity

13. Interest Revenue
Credit balance - income statement - temporary - revenues
record adjusting entries to general journal
debit balance - income statement - temporary - expense
Debit Balance - Balance sheet - permanent - asset

14. Customer deposits
similar to unearned revenue- liabilities
record transactions in general journal
post journal to general ledger
Debit Balance - Balance sheet - permanent - asset

15. Going Concern
debit balance - balance sheet - permanent - asset
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
copyright - long term assets - noncurrent
Debit Balance - Retained Earnings - Temporary - Owners Equity

16. 3rd step of analyzing transactions
determine the direction of the effect. debit or credit
Debit Balance - Income Statement - temporary - Expense
wages payable - utilities payable - interest payable - unearned revenue - note payable
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

17. 4th step of Accounting Cycle
Debit Balance - Income Statement - Temporary - expense
prepare Unadjusted trial balance
determine the direction of the effect. debit or credit
the original amount to purchase land is verifiable through the contract documents

18. 9th step of Accounting Cycle
prepare closing entry-post to general ledger
credit balance - balance sheet - permanent - liabilities
debit balance - balance sheet - permanent - asset
Contra Asset - noncurrent asset

19. Income Statement Revenues
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Sales Revenues
Close out all revenue and expense accounts into retained earnings.
Debit Balance - Income Statement - Temporary - expense

20. Income Satement 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.
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Payment x Rate x Time
Assets - Liabilities - Equity

21. 1st Step of Analying Transactions
Identify Accounts affected
Payment x Rate x Time
Credit balance - income statement - temporary - revenues
each owner has its own books - records - financial statements that are seperate.

22. Reliability
Debit Balance - Retained Earnings - Temporary - Owners Equity
Sales Revenues
the original amount to purchase land is verifiable through the contract documents
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

23. Accumulated depriciation
credit balance - balance sheet - permanent - liabilities
Assets - Liabilities - Equity
Identify Accounts affected
does the equation remain in balance?

24. Calculating Cost depreciation
an appraised value for land gives additional information that is useful to investors
cost-salvage value/years of life
Payment x Rate x Time
prepare Unadjusted trial balance

25. Closing Entries
Close out all revenue and expense accounts into retained earnings.
Revenues and Expenses
Payment x Rate x Time
post journal to general ledger

26. Profit Margin %
prepare Unadjusted trial balance
determine the direction of the effect. debit or credit
Credit balance - income statement - temporary - revenues
Net Income/Sales

27. Monetary Unit
companies must reduce the value of land - if the value is lower than its original cost.
prepar journal to general ledger
debit balance - income statement - temporary - expense
how we measure - assumes economic mean

28. Accumlated depreciation
Debit Balance - Income Statement - temporary - Expense
prepare post-closing trial balance
does the equation remain in balance?
Contra Asset - noncurrent asset

29. Intangibles
prepar journal to general ledger
Debit Balance - Balance sheet - permanent - asset
copyright - long term assets - noncurrent
Credit balance - Balance sheet and Retained Earnings - Permanent

30. Common Stock
to those willing to take time to understand it
each owner has its own books - records - financial statements that are seperate.
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Credit Balance - Balance Sheet - Permanent - owners equity

31. Calculating Interest Formula
similar to unearned revenue- liabilities
the original amount to purchase land is verifiable through the contract documents
Payment x Rate x Time
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income

32. 3rd step of Accounting Cycle
how we measure - assumes economic mean
prepar journal to general ledger
credit balance - balance sheet - permanent - liabilities
credit balance - income statement - temporary - Revenue

33. Calculating Net Income
how we measure - assumes economic mean
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Revenues-Expenses
Credit balance - income statement - temporary - revenues

34. Current Assets
(cash - accts revievable - inventory) turn into cash within 12 months
debit balance - Balance sheet - Permanent - asset
companies must reduce the value of land - if the value is lower than its original cost.
debit balance - balance sheet - permanent - asset

35. Cash Principle
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 - liability
wages payable - utilities payable - interest payable - unearned revenue - note payable
copyright - long term assets - noncurrent

36. Materiality

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

38. 1st step of Accounting Cycle
Contributed Capital - Retained Earnings - Dividends
credit balance - balance sheet - permanent - liabilities
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
analyze transactions from external events

39. Building
debit balance - Balance sheet - Permanent - asset
cost-salvage value/years of life
(long-term) assets (building - land - equipment)
Retained earnings beg. balance - Net income - dividends.

40. Conservatism
Sales Revenues
Debit Balance - Income Statement - Temporary - expense
cost-salvage value/years of life
companies must reduce the value of land - if the value is lower than its original cost.

41. Dividends
does the equation remain in balance?
Sales Revenues
companies must reduce the value of land - if the value is lower than its original cost.
decrease equity - debit balance

42. Balance Sheet Assets
Credit Balance - Balance Sheet - permanent - liability
analyze transactions from external events
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
credit balance - balance sheet - permanent - liabilities

43. Sales revenue
prepare financial statements
credit balance - income statement - temporary - Revenue
determine the direction of the effect. debit or credit
debit balance - balance sheet - permanent - asset

44. Understandability
(long-term) assets (building - land - equipment)
to those willing to take time to understand it
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

45. Relevance
debit balance - income statement - temporary - expense
Credit balance - Balance sheet and Retained Earnings - Permanent
an appraised value for land gives additional information that is useful to investors
Credit Balance - Balance Sheet - Permanent - owners equity

46. 5th step of Accounting Cycle
does the equation remain in balance?
Close out all revenue and expense accounts into retained earnings.
record adjusting entries to general journal
determine the direction of the effect. debit or credit

47. Cost of Goods Sold
record adjusting entries to general journal
Payment x Rate x Time
cost-salvage value/years of life
Debit Balance - Income Statement - Temporary - expense

48. Accounts on Income Statement
cost-salvage value/years of life
Revenues and Expenses
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Debit Balance - Retained Earnings - Temporary - Owners Equity

49. Accounts Recievable
Debit Balance - Balance sheet - permanent - asset
Contra Asset - noncurrent asset
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
Sales Revenues

50. Accts on Statement of Retained Earnings
Retained earnings beg. balance - Net income - dividends.
record adjusting entries to general journal
prepare adjusted trial balance
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments