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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. Accounts Recievable
Credit balance - Balance sheet and Retained Earnings - Permanent
Credit balance - income statement - temporary - revenues
prepare adjusted trial balance
Debit Balance - Balance sheet - permanent - asset

2. 7th step of Accounting Cycle
Debit Balance - Income Statement - Temporary - expense
similar to unearned revenue- liabilities
Identify Accounts affected
prepare adjusted trial balance

3. Economic Equity
each owner has its own books - records - financial statements that are seperate.
credit balance - income statement - temporary - Revenue
debit balance - balance sheet - permanent - asset
Identify Accounts affected

4. Cost of Goods Sold
an appraised value for land gives additional information that is useful to investors
Debit Balance - Income Statement - Temporary - expense
prepare post-closing trial balance
Credit balance - Balance sheet and Retained Earnings - Permanent

5. Consistency
a company uses the same method each year for calculating inventory
Debit Balance - Balance sheet - permanent - asset
wages payable - utilities payable - interest payable - unearned revenue - note payable
Credit balance - income statement - temporary - revenues

6. Dividends
Revenues-Expenses
Debit Balance - Retained Earnings - Temporary - Owners Equity
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
how we measure - assumes economic mean

7. Going Concern
credit balance - income statement - temporary - Revenue
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
similar to unearned revenue- liabilities
Credit balance - income statement - temporary - revenues

8. Common Stock
Credit Balance - Balance Sheet - Permanent - owners equity
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
how we measure - assumes economic mean
Debit Balance - Balance sheet - permanent - asset

9. Calculating Interest Formula
Identify Accounts affected
Payment x Rate x Time
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
prepare financial statements

10. Current Ratio
Credit balance - Balance sheet and Retained Earnings - Permanent
Current Assets/Current Liabilities
cost-salvage value/years of life
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

11. Accts on balance sheet
Assets - Liabilities - Equity
Credit balance - income statement - temporary - revenues
prepare post-closing trial balance
prepare adjusted trial balance

12. Retained Earnings
debit balance - balance sheet - permanent - asset
how we measure - assumes economic mean
to those willing to take time to understand it
Credit balance - Balance sheet and Retained Earnings - Permanent

13. Accumlated depreciation
debit balance - balance sheet - permanent - asset
Contra Asset - noncurrent asset
Contributed Capital - Retained Earnings - Dividends
companies must reduce the value of land - if the value is lower than its original cost.

14. Balance Sheet Assets
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>
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Credit balance - Balance sheet and Retained Earnings - Permanent

15. 9th step of Accounting Cycle
similar to unearned revenue- liabilities
credit balance - income statement - temporary - Revenue
prepare closing entry-post to general ledger
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

16. 4th step of analyzing transactions
prepare closing entry-post to general ledger
does the equation remain in balance?
Assets - Liabilities - Equity
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

17. Income Statement Revenues
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Credit balance - income statement - temporary - revenues
debit balance - balance sheet - permanent - asset
Sales Revenues

18. Profit Margin %
cost-salvage value/years of life
a company uses the same method each year for calculating inventory
Net Income/Sales
debit balance - Balance sheet - permanent - asset

19. 6th step of Accounting Cycle
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
a company uses the same method each year for calculating inventory
post journal to general ledger
Payment x Rate x Time

20. 3rd step of Accounting Cycle
prepar journal to general ledger
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
Identify Accounts affected

21. Conservatism
determine the direction of the effect. debit or credit
does the equation remain in balance?
companies must reduce the value of land - if the value is lower than its original cost.
Contributed Capital - Retained Earnings - Dividends

22. Dividends
Identify Accounts affected
determine the direction of the effect. debit or credit
Retained earnings beg. balance - Net income - dividends.
decrease equity - debit balance

23. Balance sheet Equity
Debit Balance - Retained Earnings - Temporary - Owners Equity
decrease equity - debit balance
Contributed Capital - Retained Earnings - Dividends
Revenues and Expenses

24. Balance Sheet Liabilities
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.
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
credit balance - balance sheet - permanent - liabilities

25. Relevance
longterm liabilities
prepare closing entry-post to general ledger
an appraised value for land gives additional information that is useful to investors
copyright - long term assets - noncurrent

26. 8th step of Accounting Cycle
prepare financial statements
(long-term) assets (building - land - equipment)
Retained earnings beg. balance - Net income - dividends.
Credit balance - Balance sheet and Retained Earnings - Permanent

27. Note Payable
prepar journal to general ledger
to those willing to take time to understand it
record transactions in general journal
Credit Balance - Balance Sheet - permanent - liability

28. Accumulated depriciation
Credit Balance - Balance Sheet - permanent - liability
Debit Balance - Balance sheet - permanent - asset
debit balance - balance sheet - permanent - asset
credit balance - balance sheet - permanent - liabilities

29. Income Satement Expenses
prepare financial statements
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
the original amount to purchase land is verifiable through the contract documents
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

30. 10th step of Accounting Cycle
companies must reduce the value of land - if the value is lower than its original cost.
a company uses the same method each year for calculating inventory
prepare post-closing trial balance
Debit Balance - Income Statement - temporary - Expense

31. Monetary Unit
how we measure - assumes economic mean
(cash - accts revievable - inventory) turn into cash within 12 months
prepare closing entry-post to general ledger
copyright - long term assets - noncurrent

32. Accounting Equation
Revenues-Expenses
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income

33. Accts on Statement of Retained Earnings
credit balance - balance sheet - permanent - liabilities
Identify Accounts affected
Retained earnings beg. balance - Net income - dividends.
Credit balance - income statement - temporary - revenues

34. Calculating Cost depreciation
Credit Balance - Balance Sheet - permanent - liability
cost-salvage value/years of life
a company uses the same method each year for calculating inventory
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

35. 1st Step of Analying Transactions
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Identify Accounts affected
Credit balance - income statement - temporary - revenues
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

36. 2nd step of Accounting Cycle
cost-salvage value/years of life
debit balance - Balance sheet - Permanent - asset
record transactions in general journal
debit balance - balance sheet - permanent - asset

37. Reliability
Debit Balance - Income Statement - Temporary - expense
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.
credit balance - balance sheet - permanent - liabilities

38. Intangibles
credit balance - income statement - temporary - Revenue
Contra Asset - noncurrent asset
copyright - long term assets - noncurrent
Retained earnings beg. balance - Net income - dividends.

39. Cash Principle
credit balance - balance sheet - permanent - liabilities
credit balance - income statement - temporary - Revenue
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Debit Balance - Retained Earnings - Temporary - Owners Equity

40. Multistep Income Statement
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
Credit balance - income statement - temporary - revenues
similar to unearned revenue- liabilities
Debit Balance - Income Statement - temporary - Expense

41. 5th step of Accounting Cycle
decrease equity - debit balance
record adjusting entries to general journal
debit balance - Balance sheet - Permanent - asset
each owner has its own books - records - financial statements that are seperate.

42. Building
the original amount to purchase land is verifiable through the contract documents
Contributed Capital - Retained Earnings - Dividends
(cash - accts revievable - inventory) turn into cash within 12 months
debit balance - Balance sheet - Permanent - asset

43. Prepaid insurance
copyright - long term assets - noncurrent
how we measure - assumes economic mean
the original amount to purchase land is verifiable through the contract documents
debit balance - balance sheet - permanent - asset

44. Interest Revenue
Close out all revenue and expense accounts into retained earnings.
Credit Balance - Balance Sheet - permanent - liability
determine the direction of the effect. debit or credit
Credit balance - income statement - temporary - revenues

45. Understandability
debit balance - income statement - temporary - expense
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
to those willing to take time to understand it
Retained earnings beg. balance - Net income - dividends.

46. 4th step of Accounting Cycle
Credit balance - Balance sheet and Retained Earnings - Permanent
similar to unearned revenue- liabilities
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
prepare Unadjusted trial balance

47. Customer deposits
decrease equity - debit balance
debit balance - income statement - temporary - expense
(cash - accts revievable - inventory) turn into cash within 12 months
similar to unearned revenue- liabilities

48. Current Assets
(cash - accts revievable - inventory) turn into cash within 12 months
Debit Balance - Income Statement - temporary - Expense
a company uses the same method each year for calculating inventory
Current Assets/Current Liabilities

49. Sales revenue
Net Income/Sales
Revenues-Expenses
credit balance - income statement - temporary - Revenue
Retained earnings beg. balance - Net income - dividends.

50. NonCurrent Assets
prepare adjusted trial balance
post journal to general ledger
(long-term) assets (building - land - equipment)
Revenues-Expenses