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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. Accumulated depriciation
prepare adjusted 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
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

2. Balance Sheet Assets
Net Income/Sales
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
(cash - accts revievable - inventory) turn into cash within 12 months

3. 9th step of Accounting Cycle
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Credit balance - income statement - temporary - revenues
prepare closing entry-post to general ledger
Net Income/Sales

4. Accounting Equation
each owner has its own books - records - financial statements that are seperate.
determine the direction of the effect. debit or credit
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

5. Sales revenue
the original amount to purchase land is verifiable through the contract documents
credit balance - income statement - temporary - Revenue
Sales Revenues
analyze transactions from external events

6. Unearned revenue
credit balance - balance sheet - permanent - liabilities
debit balance - income statement - temporary - expense
similar to unearned revenue- liabilities
record adjusting entries to general journal

7. Balance Sheet Liabilities
wages payable - utilities payable - interest payable - unearned revenue - note payable
credit balance - balance sheet - permanent - liabilities
credit balance - income statement - temporary - Revenue
Payment x Rate x Time

8. Economic Equity
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
(long-term) assets (building - land - equipment)
each owner has its own books - records - financial statements that are seperate.
record transactions in general journal

9. Utilities expense
an appraised value for land gives additional information that is useful to investors
debit balance - balance sheet - permanent - asset
each owner has its own books - records - financial statements that are seperate.
debit balance - income statement - temporary - expense

10. Interest Expense
Debit Balance - Income Statement - temporary - Expense
prepare adjusted trial balance
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

11. Profit Margin %
longterm liabilities
Revenues-Expenses
Net Income/Sales
(cash - accts revievable - inventory) turn into cash within 12 months

12. Relevance
an appraised value for land gives additional information that is useful to investors
Debit Balance - Income Statement - Temporary - expense
Sales Revenues
debit balance - income statement - temporary - expense

13. 2nd step of analyzing transactions
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Close out all revenue and expense accounts into retained earnings.
cost-salvage value/years of life

14. Common Stock
Credit Balance - Balance Sheet - Permanent - owners equity
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Debit Balance - Income Statement - temporary - Expense
debit balance - Balance sheet - permanent - asset

15. Current Ratio
longterm liabilities
(long-term) assets (building - land - equipment)
Current Assets/Current Liabilities
copyright - long term assets - noncurrent

16. Building
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Debit Balance - Retained Earnings - Temporary - Owners Equity
debit balance - Balance sheet - Permanent - asset
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

17. Accts on balance sheet
Assets - Liabilities - Equity
debit balance - balance sheet - permanent - asset
Revenues and Expenses
debit balance - balance sheet - permanent - asset

18. Dividends
Debit Balance - Retained Earnings - Temporary - Owners Equity
prepare financial statements
Revenues and Expenses
Credit Balance - Balance Sheet - Permanent - owners equity

19. 10th step of Accounting Cycle
(long-term) assets (building - land - equipment)
Debit Balance - Retained Earnings - Temporary - Owners Equity
similar to unearned revenue- liabilities
prepare post-closing trial balance

20. Understandability
to those willing to take time to understand it
credit balance - balance sheet - permanent - liabilities
Contributed Capital - Retained Earnings - Dividends
Credit Balance - Balance Sheet - Permanent - owners equity

21. Monetary Unit
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
how we measure - assumes economic mean
a company uses the same method each year for calculating inventory

22. 7th step of Accounting Cycle
prepare adjusted trial balance
prepare financial statements
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
debit balance - Balance sheet - permanent - asset

23. Consistency
does the equation remain in balance?
a company uses the same method each year for calculating inventory
debit balance - Balance sheet - permanent - asset
determine the direction of the effect. debit or credit

24. Cash Principle
does the equation remain in balance?
Credit Balance - Balance Sheet - Permanent - owners equity
the original amount to purchase land is verifiable through the contract documents
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

25. Conservatism
the original amount to purchase land is verifiable through the contract documents
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.
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

26. Goodwill
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
how we measure - assumes economic mean
Identify Accounts affected
debit balance - balance sheet - permanent - asset

27. 1st Step of Analying Transactions
a company uses the same method each year for calculating inventory
Credit balance - income statement - temporary - revenues
Debit Balance - Retained Earnings - Temporary - Owners Equity
Identify Accounts affected

28. Closing Entries
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Close out all revenue and expense accounts into retained earnings.
prepare Unadjusted trial balance
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

29. 6th step of Accounting Cycle
Identify Accounts affected
Payment x Rate x Time
post journal to general ledger
Debit Balance - Income Statement - Temporary - expense

30. Intangibles
an appraised value for land gives additional information that is useful to investors
Identify Accounts affected
record adjusting entries to general journal
copyright - long term assets - noncurrent

31. Dividends
longterm liabilities
decrease equity - debit balance
prepar journal to general ledger
debit balance - balance sheet - permanent - asset

32. Cost of Goods Sold
wages payable - utilities payable - interest payable - unearned revenue - note payable
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
prepare closing entry-post to general ledger
Debit Balance - Income Statement - Temporary - expense

33. Inventory
debit balance - Balance sheet - permanent - asset
Current Assets/Current Liabilities
copyright - long term assets - noncurrent
credit balance - income statement - temporary - Revenue

34. Balance sheet Equity
Contributed Capital - Retained Earnings - Dividends
credit balance - balance sheet - permanent - liabilities
decrease equity - debit balance
Identify Accounts affected

35. NonCurrent Assets
(long-term) assets (building - land - equipment)
Sales Revenues
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
prepare closing entry-post to general ledger

36. Accts on Statement of Retained Earnings
Credit Balance - Balance Sheet - permanent - liability
Credit balance - income statement - temporary - revenues
Retained earnings beg. balance - Net income - dividends.
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

37. Retained Earnings
credit balance - balance sheet - permanent - liabilities
Credit balance - Balance sheet and Retained Earnings - Permanent
(long-term) assets (building - land - equipment)
Credit Balance - Balance Sheet - Permanent - owners equity

38. 1st step of Accounting Cycle
Net Income/Sales
Debit Balance - Income Statement - temporary - Expense
analyze transactions from external events
how we measure - assumes economic mean

39. 8th step of Accounting Cycle
Payment x Rate x Time
Debit Balance - Income Statement - Temporary - expense
prepare post-closing trial balance
prepare financial statements

40. Accumlated depreciation
credit balance - income statement - temporary - Revenue
debit balance - balance sheet - permanent - asset
Contra Asset - noncurrent asset
credit balance - balance sheet - permanent - liabilities

41. Prepaid insurance
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
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.
credit balance - balance sheet - permanent - liabilities

42. Reliability
prepare financial statements
companies must reduce the value of land - if the value is lower than its original cost.
Revenues and Expenses
the original amount to purchase land is verifiable through the contract documents

43. 3rd step of Accounting Cycle
post journal to general ledger
prepar journal to general ledger
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
(long-term) assets (building - land - equipment)

44. Calculating Cost depreciation
(long-term) assets (building - land - equipment)
cost-salvage value/years of life
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Contributed Capital - Retained Earnings - Dividends

45. Going Concern
Contra Asset - noncurrent asset
Revenues and Expenses
how we measure - assumes economic mean
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

46. NonCurrent Liabilities
longterm liabilities
Contributed Capital - Retained Earnings - Dividends
copyright - long term assets - noncurrent
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

47. Current Assets
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Sales Revenues
(cash - accts revievable - inventory) turn into cash within 12 months
prepare financial statements

48. Accounts Recievable
similar to unearned revenue- liabilities
Retained earnings beg. balance - Net income - dividends.
Debit Balance - Balance sheet - permanent - asset
copyright - long term assets - noncurrent

49. Materiality

50. Note Payable
Current Assets/Current Liabilities
each owner has its own books - records - financial statements that are seperate.
Credit Balance - Balance Sheet - permanent - liability
credit balance - balance sheet - permanent - liabilities