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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. 1st Step of Analying Transactions
credit balance - balance sheet - permanent - liabilities
Identify Accounts affected
record transactions in general journal
cost-salvage value/years of life

2. Profit Margin %
Sales Revenues
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
Net Income/Sales
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

3. Closing Entries
Close out all revenue and expense accounts into retained earnings.
post journal to general ledger
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
(long-term) assets (building - land - equipment)

4. Accumulated depriciation
similar to unearned revenue- liabilities
the original amount to purchase land is verifiable through the contract documents
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
credit balance - balance sheet - permanent - liabilities

5. 4th step of analyzing transactions
decrease equity - debit balance
does the equation remain in balance?
Net Income/Sales
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

6. Prepaid insurance
prepare financial statements
Debit Balance - Income Statement - temporary - Expense
record transactions in general journal
debit balance - balance sheet - permanent - asset

7. 5th step of Accounting Cycle
determine the direction of the effect. debit or credit
Credit Balance - Balance Sheet - Permanent - owners equity
record adjusting entries to general journal
Debit Balance - Balance sheet - permanent - asset

8. Retained Earnings
prepare Unadjusted trial balance
Credit balance - income statement - temporary - revenues
copyright - long term assets - noncurrent
Credit balance - Balance sheet and Retained Earnings - Permanent

9. Income Statement Revenues
Sales Revenues
(cash - accts revievable - inventory) turn into cash within 12 months
debit balance - Balance sheet - permanent - asset
record adjusting entries to general journal

10. Intangibles
companies must reduce the value of land - if the value is lower than its original cost.
copyright - long term assets - noncurrent
Contra Asset - noncurrent asset
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

11. 3rd step of analyzing transactions
determine the direction of the effect. debit or credit
Credit balance - income statement - temporary - revenues
Sales Revenues
credit balance - income statement - temporary - Revenue

12. Monetary Unit
copyright - long term assets - noncurrent
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
how we measure - assumes economic mean
Current Assets/Current Liabilities

13. Cash Principle
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
each owner has its own books - records - financial statements that are seperate.
does the equation remain in balance?
debit balance - balance sheet - permanent - asset

14. Goodwill
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Identify Accounts affected
an appraised value for land gives additional information that is useful to investors
debit balance - balance sheet - permanent - asset

15. Current Ratio
Debit Balance - Balance sheet - permanent - asset
Identify Accounts affected
Current Assets/Current Liabilities
does the equation remain in balance?

16. Materiality

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17. Balance Sheet Liabilities
wages payable - utilities payable - interest payable - unearned revenue - note payable
copyright - long term assets - noncurrent
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
companies must reduce the value of land - if the value is lower than its original cost.

18. Understandability
to those willing to take time to understand it
Assets - Liabilities - Equity
post journal to general ledger
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

19. Reliability
Debit Balance - Income Statement - temporary - Expense
debit balance - income statement - temporary - expense
Current Assets/Current Liabilities
the original amount to purchase land is verifiable through the contract documents

20. 6th step of Accounting Cycle
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
post journal to general ledger
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 - liabilities

21. 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
record adjusting entries to general journal
Close out all revenue and expense accounts into retained earnings.
prepare post-closing trial balance

22. Balance sheet Equity
Contributed Capital - Retained Earnings - Dividends
Net Income/Sales
debit balance - balance sheet - permanent - asset
the original amount to purchase land is verifiable through the contract documents

23. Calculating Interest Formula
Identify Accounts affected
prepare adjusted trial balance
Net Income/Sales
Payment x Rate x Time

24. Accumlated depreciation
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
(long-term) assets (building - land - equipment)
Net Income/Sales
Contra Asset - noncurrent asset

25. Relevance
prepare adjusted trial balance
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
an appraised value for land gives additional information that is useful to investors
(cash - accts revievable - inventory) turn into cash within 12 months

26. Note Payable
Debit Balance - Retained Earnings - Temporary - Owners Equity
Credit Balance - Balance Sheet - permanent - liability
record adjusting entries to general journal
longterm liabilities

27. Economic Equity
to those willing to take time to understand it
each owner has its own books - records - financial statements that are seperate.
decrease equity - debit balance
Debit Balance - Income Statement - temporary - Expense

28. Accts on balance sheet
debit balance - Balance sheet - permanent - asset
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
Assets - Liabilities - Equity

29. 10th step of Accounting Cycle
decrease equity - debit balance
prepare post-closing trial balance
Revenues and Expenses
does the equation remain in balance?

30. Accts on Statement of Retained Earnings
does the equation remain in balance?
Credit Balance - Balance Sheet - permanent - liability
debit balance - Balance sheet - permanent - asset
Retained earnings beg. balance - Net income - dividends.

31. Customer deposits
Credit Balance - Balance Sheet - permanent - liability
does the equation remain in balance?
similar to unearned revenue- liabilities
how we measure - assumes economic mean

32. Going Concern
Revenues-Expenses
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Credit Balance - Balance Sheet - Permanent - owners equity
Debit Balance - Balance sheet - permanent - asset

33. Common Stock
Debit Balance - Retained Earnings - Temporary - Owners Equity
Contra Asset - noncurrent asset
Credit Balance - Balance Sheet - Permanent - owners equity
a company uses the same method each year for calculating inventory

34. 9th step of Accounting Cycle
Credit Balance - Balance Sheet - Permanent - owners equity
prepare financial statements
Net Income/Sales
prepare closing entry-post to general ledger

35. Consistency
a company uses the same method each year for calculating inventory
prepare closing entry-post to general ledger
longterm liabilities
Contra Asset - noncurrent asset

36. NonCurrent Assets
(long-term) assets (building - land - equipment)
analyze transactions from external events
Revenues and Expenses
Contributed Capital - Retained Earnings - Dividends

37. Interest Expense
Revenues and Expenses
record transactions in general journal
Debit Balance - Income Statement - temporary - Expense
Debit Balance - Balance sheet - permanent - asset

38. Calculating Cost depreciation
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
cost-salvage value/years of life
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

39. 4th step of Accounting Cycle
prepare Unadjusted trial balance
debit balance - balance sheet - permanent - asset
Current Assets/Current Liabilities
Revenues and Expenses

40. Current Assets
a company uses the same method each year for calculating inventory
credit balance - balance sheet - permanent - liabilities
Revenues-Expenses
(cash - accts revievable - inventory) turn into cash within 12 months

41. Accounts on Income Statement
Revenues and Expenses
prepare closing entry-post to general ledger
Credit Balance - Balance Sheet - Permanent - owners equity
prepare post-closing trial balance

42. Unearned revenue
credit balance - balance sheet - permanent - liabilities
copyright - long term assets - noncurrent
wages payable - utilities payable - interest payable - unearned revenue - note payable
Debit Balance - Balance sheet - permanent - asset

43. NonCurrent Liabilities
a company uses the same method each year for calculating inventory
decrease equity - debit balance
Retained earnings beg. balance - Net income - dividends.
longterm liabilities

44. 3rd step of Accounting Cycle
prepar journal to general ledger
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Net Income/Sales
wages payable - utilities payable - interest payable - unearned revenue - note payable

45. Dividends
credit balance - balance sheet - permanent - liabilities
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
wages payable - utilities payable - interest payable - unearned revenue - note payable
Debit Balance - Retained Earnings - Temporary - Owners Equity

46. Accounting Equation
record transactions in general journal
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
prepar journal to general ledger
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

47. Calculating Net Income
Sales Revenues
prepare adjusted trial balance
Revenues-Expenses
Revenues and Expenses

48. Accounts Recievable
credit balance - balance sheet - permanent - liabilities
Debit Balance - Balance sheet - permanent - asset
analyze transactions from external events
Debit Balance - Income Statement - Temporary - expense

49. Cost of Goods Sold
credit balance - balance sheet - permanent - liabilities
to those willing to take time to understand it
Identify Accounts affected
Debit Balance - Income Statement - Temporary - expense

50. Dividends
Payment x Rate x Time
decrease equity - debit balance
Net Income/Sales
debit balance - balance sheet - permanent - asset