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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. 10th step of Accounting Cycle
credit balance - balance sheet - permanent - liabilities
prepare post-closing trial balance
how we measure - assumes economic mean
Net Income/Sales

2. 6th step of Accounting Cycle
post journal to general ledger
similar to unearned revenue- liabilities
Debit Balance - Retained Earnings - Temporary - Owners Equity
does the equation remain in balance?

3. Unearned revenue
post journal to general ledger
credit balance - income statement - temporary - Revenue
Credit balance - income statement - temporary - revenues
credit balance - balance sheet - permanent - liabilities

4. Balance Sheet Assets
debit balance - Balance sheet - permanent - asset
Credit balance - income statement - temporary - revenues
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
(cash - accts revievable - inventory) turn into cash within 12 months

5. Interest Revenue
Sales Revenues
Credit balance - income statement - temporary - revenues
prepare post-closing trial balance
Debit Balance - Income Statement - Temporary - expense

6. Current Assets
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Current Assets/Current Liabilities
does the equation remain in balance?
(cash - accts revievable - inventory) turn into cash within 12 months

7. 2nd step of analyzing transactions
debit balance - balance sheet - permanent - asset
prepare Unadjusted trial balance
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Contributed Capital - Retained Earnings - Dividends

8. 2nd step of Accounting Cycle
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
record transactions in general journal
Contributed Capital - Retained Earnings - Dividends
debit balance - Balance sheet - permanent - asset

9. Relevance
copyright - long term assets - noncurrent
credit balance - balance sheet - permanent - liabilities
an appraised value for land gives additional information that is useful to investors
each owner has its own books - records - financial statements that are seperate.

10. 3rd step of analyzing transactions
similar to unearned revenue- liabilities
Net Income/Sales
Debit Balance - Retained Earnings - Temporary - Owners Equity
determine the direction of the effect. debit or credit

11. Accounting Equation
Credit balance - income statement - temporary - revenues
debit balance - balance sheet - permanent - asset
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

12. Intangibles
each owner has its own books - records - financial statements that are seperate.
Revenues-Expenses
copyright - long term assets - noncurrent
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

13. Note Payable
Retained earnings beg. balance - Net income - dividends.
Credit Balance - Balance Sheet - permanent - liability
decrease equity - debit balance
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

14. Accumlated depreciation
Retained earnings beg. balance - Net income - dividends.
Close out all revenue and expense accounts into retained earnings.
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Contra Asset - noncurrent asset

15. Accts on balance sheet
prepare closing entry-post to general ledger
Assets - Liabilities - Equity
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Identify Accounts affected

16. Calculating Cost depreciation
cost-salvage value/years of life
Retained earnings beg. balance - Net income - dividends.
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

17. Customer deposits
Debit Balance - Income Statement - Temporary - expense
record transactions in general journal
Credit Balance - Balance Sheet - permanent - liability
similar to unearned revenue- liabilities

18. Accounts Recievable
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
prepare adjusted trial balance
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Debit Balance - Balance sheet - permanent - asset

19. Current Ratio
credit balance - balance sheet - permanent - liabilities
Current Assets/Current Liabilities
credit balance - income statement - temporary - Revenue
Identify Accounts affected

20. 7th step of Accounting Cycle
prepare adjusted trial balance
Debit Balance - Income Statement - temporary - Expense
copyright - long term assets - noncurrent
similar to unearned revenue- liabilities

21. Sales revenue
credit balance - balance sheet - permanent - liabilities
Net Income/Sales
credit balance - income statement - temporary - 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.

22. Accts on Statement of Retained Earnings
(cash - accts revievable - inventory) turn into cash within 12 months
analyze transactions from external events
Retained earnings beg. balance - Net income - dividends.
each owner has its own books - records - financial statements that are seperate.

23. Income Statement Revenues
prepare post-closing trial balance
record adjusting entries to general journal
how we measure - assumes economic mean
Sales Revenues

24. 9th step of Accounting Cycle
prepare closing entry-post to general ledger
debit balance - income statement - temporary - expense
debit balance - Balance sheet - permanent - asset
Retained earnings beg. balance - Net income - dividends.

25. Income Satement Expenses
decrease equity - debit balance
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Credit Balance - Balance Sheet - permanent - liability
Close out all revenue and expense accounts into retained earnings.

26. Inventory
the original amount to purchase land is verifiable through the contract documents
Net Income/Sales
each owner has its own books - records - financial statements that are seperate.
debit balance - Balance sheet - permanent - asset

27. Balance sheet Equity
Contributed Capital - Retained Earnings - Dividends
prepare closing entry-post to general ledger
prepare Unadjusted trial balance
prepar journal to general ledger

28. Going Concern
Contra Asset - noncurrent asset
credit balance - balance sheet - permanent - liabilities
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
longterm liabilities

29. Cost of Goods Sold
each owner has its own books - records - financial statements that are seperate.
Debit Balance - Income Statement - Temporary - expense
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

30. Calculating Interest Formula
Payment x Rate x Time
Credit Balance - Balance Sheet - permanent - liability
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.

31. Interest Expense
credit balance - balance sheet - permanent - liabilities
Credit Balance - Balance Sheet - permanent - liability
Payment x Rate x Time
Debit Balance - Income Statement - temporary - Expense

32. 4th step of analyzing transactions
does the equation remain in balance?
debit balance - balance sheet - permanent - asset
similar to unearned revenue- liabilities
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

33. Prepaid insurance
debit balance - balance sheet - permanent - asset
Revenues and Expenses
Net Income/Sales
a company uses the same method each year for calculating inventory

34. Balance Sheet Liabilities
Debit Balance - Income Statement - temporary - Expense
wages payable - utilities payable - interest payable - unearned revenue - note payable
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Debit Balance - Balance sheet - permanent - asset

35. Common Stock
Identify Accounts affected
credit balance - balance sheet - permanent - liabilities
Revenues and Expenses
Credit Balance - Balance Sheet - Permanent - owners equity

36. Monetary Unit
Revenues and Expenses
cost-salvage value/years of life
Revenues-Expenses
how we measure - assumes economic mean

37. Utilities expense
Contributed Capital - Retained Earnings - Dividends
Revenues-Expenses
debit balance - income statement - temporary - expense
copyright - long term assets - noncurrent

38. Conservatism
Contra Asset - noncurrent asset
companies must reduce the value of land - if the value is lower than its original cost.
debit balance - Balance sheet - permanent - asset
credit balance - balance sheet - permanent - liabilities

39. 4th step of Accounting Cycle
prepare Unadjusted trial balance
does the equation remain in balance?
Credit balance - Balance sheet and Retained Earnings - Permanent
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

40. Multistep Income Statement
Identify Accounts affected
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 - permanent - liabilities
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

41. Materiality

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42. Reliability
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
record transactions in general journal
similar to unearned revenue- liabilities
the original amount to purchase land is verifiable through the contract documents

43. Consistency
a company uses the same method each year for calculating inventory
Debit Balance - Income Statement - Temporary - expense
Payment x Rate x Time
record transactions in general journal

44. Closing Entries
debit balance - Balance sheet - permanent - asset
Close out all revenue and expense accounts into retained earnings.
credit balance - balance sheet - permanent - liabilities
credit balance - balance sheet - permanent - liabilities

45. NonCurrent Assets
(long-term) assets (building - land - equipment)
credit balance - balance sheet - permanent - liabilities
Debit Balance - Income Statement - temporary - Expense
Current Assets/Current Liabilities

46. Understandability
to those willing to take time to understand it
credit balance - income statement - temporary - Revenue
similar to unearned revenue- liabilities
Retained earnings beg. balance - Net income - dividends.

47. 8th step of Accounting Cycle
decrease equity - debit balance
Payment x Rate x Time
wages payable - utilities payable - interest payable - unearned revenue - note payable
prepare financial statements

48. Dividends
Debit Balance - Balance sheet - permanent - asset
debit balance - income statement - temporary - expense
decrease equity - debit balance
Close out all revenue and expense accounts into retained earnings.

49. Economic Equity
Debit Balance - Income Statement - temporary - Expense
Contributed Capital - Retained Earnings - Dividends
each owner has its own books - records - financial statements that are seperate.
Revenues-Expenses

50. Profit Margin %
Net Income/Sales
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
prepare adjusted trial balance
Debit Balance - Income Statement - temporary - Expense