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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. Accts on balance sheet
a company uses the same method each year for calculating inventory
Payment x Rate x Time
Assets - Liabilities - Equity
Debit Balance - Income Statement - temporary - Expense

2. Customer deposits
prepare adjusted trial balance
companies must reduce the value of land - if the value is lower than its original cost.
similar to unearned revenue- liabilities
wages payable - utilities payable - interest payable - unearned revenue - note payable

3. 8th step of Accounting Cycle
longterm liabilities
debit balance - income statement - temporary - expense
prepare financial statements
debit balance - balance sheet - permanent - asset

4. Prepaid insurance
Sales Revenues
debit balance - balance sheet - permanent - asset
credit balance - income statement - temporary - Revenue
Retained earnings beg. balance - Net income - dividends.

5. Current Ratio
Sales Revenues
each owner has its own books - records - financial statements that are seperate.
debit balance - Balance sheet - Permanent - asset
Current Assets/Current Liabilities

6. Balance sheet Equity
record adjusting entries to general journal
Debit Balance - Income Statement - temporary - Expense
Contributed Capital - Retained Earnings - Dividends
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

7. Interest Expense
Credit Balance - Balance Sheet - permanent - liability
Debit Balance - Income Statement - temporary - Expense
analyze transactions from external events
copyright - long term assets - noncurrent

8. Balance Sheet Assets
record adjusting entries to general journal
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
an appraised value for land gives additional information that is useful to investors
Net Income/Sales

9. NonCurrent Assets
record transactions in general journal
does the equation remain in balance?
(long-term) assets (building - land - equipment)
cost-salvage value/years of life

10. 1st step of Accounting Cycle
prepare closing entry-post to general ledger
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
analyze transactions from external events
decrease equity - debit balance

11. Dividends
decrease equity - debit balance
an appraised value for land gives additional information that is useful to investors
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Sales Revenues

12. Relevance
an appraised value for land gives additional information that is useful to investors
Credit balance - Balance sheet and Retained Earnings - Permanent
Debit Balance - Balance sheet - permanent - asset
debit balance - Balance sheet - Permanent - asset

13. Closing Entries
Close out all revenue and expense accounts into retained earnings.
the original amount to purchase land is verifiable through the contract documents
how we measure - assumes economic mean
determine the direction of the effect. debit or credit

14. Economic Equity
credit balance - balance sheet - permanent - liabilities
each owner has its own books - records - financial statements that are seperate.
similar to unearned revenue- liabilities
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

15. Monetary Unit
to those willing to take time to understand it
how we measure - assumes economic mean
determine the direction of the effect. debit or credit
does the equation remain in balance?

16. Accumulated depriciation
Debit Balance - Income Statement - Temporary - expense
cost-salvage value/years of life
copyright - long term assets - noncurrent
credit balance - balance sheet - permanent - liabilities

17. 4th step of Accounting Cycle
Debit Balance - Income Statement - temporary - Expense
prepare Unadjusted trial 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.
credit balance - balance sheet - permanent - liabilities

18. Calculating Cost depreciation
cost-salvage value/years of life
prepare financial statements
Sales Revenues
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

19. Profit Margin %
prepare post-closing trial balance
similar to unearned revenue- liabilities
Payment x Rate x Time
Net Income/Sales

20. Goodwill
longterm liabilities
Sales Revenues
credit balance - balance sheet - permanent - liabilities
debit balance - balance sheet - permanent - asset

21. NonCurrent Liabilities
post journal to general ledger
Sales Revenues
longterm liabilities
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

22. 3rd step of analyzing transactions
Debit Balance - Income Statement - Temporary - expense
determine the direction of the effect. debit or credit
Credit Balance - Balance Sheet - Permanent - owners equity
Credit balance - Balance sheet and Retained Earnings - Permanent

23. Common Stock
credit balance - income statement - temporary - Revenue
debit balance - Balance sheet - Permanent - asset
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Credit Balance - Balance Sheet - Permanent - owners equity

24. 2nd step of Accounting Cycle
Debit Balance - Retained Earnings - Temporary - Owners Equity
Sales Revenues
Payment x Rate x Time
record transactions in general journal

25. Cost of Goods Sold
Debit Balance - Income Statement - Temporary - expense
Close out all revenue and expense accounts into retained earnings.
(long-term) assets (building - land - equipment)
longterm liabilities

26. Interest Revenue
debit balance - Balance sheet - permanent - asset
Credit Balance - Balance Sheet - permanent - liability
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Credit balance - income statement - temporary - revenues

27. Conservatism
does the equation remain in balance?
post journal to general ledger
Debit Balance - Income Statement - Temporary - expense
companies must reduce the value of land - if the value is lower than its original cost.

28. 7th step of Accounting Cycle
debit balance - Balance sheet - permanent - asset
Contributed Capital - Retained Earnings - Dividends
prepare adjusted trial balance
record adjusting entries to general journal

29. Understandability
Retained earnings beg. balance - Net income - dividends.
credit balance - balance sheet - permanent - liabilities
to those willing to take time to understand it
prepare closing entry-post to general ledger

30. 4th step of analyzing transactions
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
does the equation remain in balance?
debit balance - balance sheet - permanent - asset
Close out all revenue and expense accounts into retained earnings.

31. 9th step of Accounting Cycle
Sales Revenues
Debit Balance - Income Statement - temporary - Expense
prepare post-closing trial balance
prepare closing entry-post to general ledger

32. Income Statement Revenues
Debit Balance - Balance sheet - permanent - asset
decrease equity - debit balance
Sales Revenues
post journal to general ledger

33. 5th step of Accounting Cycle
record adjusting entries to general journal
copyright - long term assets - noncurrent
Current Assets/Current Liabilities
determine the direction of the effect. debit or credit

34. Utilities expense
Close out all revenue and expense accounts into retained earnings.
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
Credit balance - income statement - temporary - revenues

35. Multistep Income Statement
Close out all revenue and expense accounts into retained earnings.
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
each owner has its own books - records - financial statements that are seperate.
Debit Balance - Balance sheet - permanent - asset

36. Dividends
Current Assets/Current Liabilities
analyze transactions from external events
Debit Balance - Retained Earnings - Temporary - Owners Equity
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

37. Inventory
Contributed Capital - Retained Earnings - Dividends
debit balance - Balance sheet - permanent - asset
record adjusting entries to general journal
does the equation remain in balance?

38. Accounts Recievable
(long-term) assets (building - land - equipment)
similar to unearned revenue- liabilities
Credit balance - income statement - temporary - revenues
Debit Balance - Balance sheet - permanent - asset

39. Note Payable
wages payable - utilities payable - interest payable - unearned revenue - note payable
companies must reduce the value of land - if the value is lower than its original cost.
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Credit Balance - Balance Sheet - permanent - liability

40. Going Concern
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
debit balance - Balance sheet - Permanent - asset
Debit Balance - Retained Earnings - Temporary - Owners Equity
(long-term) assets (building - land - equipment)

41. Consistency
a company uses the same method each year for calculating inventory
Sales Revenues
copyright - long term assets - noncurrent
Assets - Liabilities - Equity

42. Balance Sheet Liabilities
wages payable - utilities payable - interest payable - unearned revenue - note payable
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Retained earnings beg. balance - Net income - dividends.
a company uses the same method each year for calculating inventory

43. Cash Principle
Debit Balance - Balance sheet - permanent - asset
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
analyze transactions from external events
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

44. Calculating Net Income
Payment x Rate x Time
wages payable - utilities payable - interest payable - unearned revenue - note payable
companies must reduce the value of land - if the value is lower than its original cost.
Revenues-Expenses

45. Sales revenue
cost-salvage value/years of life
credit balance - income statement - temporary - Revenue
an appraised value for land gives additional information that is useful to investors
(long-term) assets (building - land - equipment)

46. 3rd step of Accounting Cycle
prepar journal to general ledger
credit balance - income statement - temporary - Revenue
Payment x Rate x Time
analyze transactions from external events

47. Reliability
the original amount to purchase land is verifiable through the contract documents
Retained earnings beg. balance - Net income - dividends.
an appraised value for land gives additional information that is useful to investors
Credit Balance - Balance Sheet - Permanent - owners equity

48. Building
Net Income/Sales
debit balance - Balance sheet - Permanent - asset
analyze transactions from external events
each owner has its own books - records - financial statements that are seperate.

49. 10th step of Accounting Cycle
decrease equity - debit balance
(cash - accts revievable - inventory) turn into cash within 12 months
Debit Balance - Balance sheet - permanent - asset
prepare post-closing trial balance

50. 2nd step of analyzing transactions
Credit balance - Balance sheet and Retained Earnings - Permanent
longterm liabilities
Contra Asset - noncurrent asset
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue