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Business Accounting Basics

Instructions:

Answer 50 questions in 15 minutes.
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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. Calculating Cost depreciation
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
the original amount to purchase land is verifiable through the contract documents
cost-salvage value/years of life
Assets - Liabilities - Equity

2. 3rd step of analyzing transactions
determine the direction of the effect. debit or credit
an appraised value for land gives additional information that is useful to investors
decrease equity - debit balance
credit balance - balance sheet - permanent - liabilities

3. Retained Earnings
Credit balance - Balance sheet and Retained Earnings - Permanent
debit balance - balance sheet - permanent - asset
how we measure - assumes economic mean
credit balance - income statement - temporary - Revenue

4. Profit Margin %
Net Income/Sales
Sales Revenues
Debit Balance - Income Statement - Temporary - expense
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

5. 8th step of Accounting Cycle
(cash - accts revievable - inventory) turn into cash within 12 months
prepare financial statements
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

6. Common Stock
prepare Unadjusted trial balance
determine the direction of the effect. debit or credit
Debit Balance - Income Statement - Temporary - expense
Credit Balance - Balance Sheet - Permanent - owners equity

7. Building
a company uses the same method each year for calculating inventory
how we measure - assumes economic mean
debit balance - Balance sheet - Permanent - asset
Close out all revenue and expense accounts into retained earnings.

8. Utilities expense
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
to those willing to take time to understand it
a company uses the same method each year for calculating inventory
debit balance - income statement - temporary - expense

9. 4th step of analyzing transactions
Credit Balance - Balance Sheet - permanent - liability
does the equation remain in balance?
Net Income/Sales
similar to unearned revenue- liabilities

10. Dividends
Identify Accounts affected
Debit Balance - Retained Earnings - Temporary - Owners Equity
Contributed Capital - Retained Earnings - Dividends
a company uses the same method each year for calculating inventory

11. Note Payable
similar to unearned revenue- liabilities
to those willing to take time to understand it
Credit Balance - Balance Sheet - permanent - liability
Debit Balance - Income Statement - Temporary - expense

12. 10th step of Accounting Cycle
Revenues-Expenses
to those willing to take time to understand it
prepare post-closing trial balance
analyze transactions from external events

13. Calculating Net Income
credit balance - balance sheet - permanent - liabilities
Debit Balance - Income Statement - Temporary - expense
prepar journal to general ledger
Revenues-Expenses

14. Unearned revenue
credit balance - balance sheet - permanent - liabilities
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
debit balance - Balance sheet - Permanent - asset
to those willing to take time to understand it

15. 7th step of Accounting Cycle
prepare closing entry-post to general ledger
post journal to general ledger
prepare adjusted trial balance
Credit Balance - Balance Sheet - permanent - liability

16. Economic Equity
Credit balance - income statement - temporary - revenues
each owner has its own books - records - financial statements that are seperate.
Close out all revenue and expense accounts into retained earnings.
how we measure - assumes economic mean

17. 5th step of Accounting Cycle
analyze transactions from external events
Identify Accounts affected
record adjusting entries to general journal
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

18. Accts on Statement of Retained Earnings
each owner has its own books - records - financial statements that are seperate.
record transactions in general journal
debit balance - balance sheet - permanent - asset
Retained earnings beg. balance - Net income - dividends.

19. Accounts Recievable
decrease equity - debit balance
Debit Balance - Income Statement - Temporary - expense
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.

20. Inventory
Debit Balance - Income Statement - temporary - Expense
debit balance - Balance sheet - permanent - asset
decrease equity - debit balance
credit balance - income statement - temporary - Revenue

21. Reliability
prepare closing entry-post to general ledger
the original amount to purchase land is verifiable through the contract documents
prepare post-closing trial balance
record adjusting entries to general journal

22. Monetary Unit
prepare financial statements
Credit Balance - Balance Sheet - Permanent - owners equity
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
how we measure - assumes economic mean

23. Cost of Goods Sold
debit balance - Balance sheet - Permanent - asset
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Debit Balance - Income Statement - Temporary - expense
prepare Unadjusted trial balance

24. Customer deposits
similar to unearned revenue- liabilities
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
cost-salvage value/years of life

25. Current Assets
credit balance - balance sheet - permanent - liabilities
(cash - accts revievable - inventory) turn into cash within 12 months
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

26. 4th step of Accounting Cycle
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
record adjusting entries to general journal
prepare Unadjusted trial balance
debit balance - income statement - temporary - expense

27. Understandability
the original amount to purchase land is verifiable through the contract documents
Debit Balance - Income Statement - temporary - Expense
debit balance - Balance sheet - Permanent - asset
to those willing to take time to understand it

28. 1st Step of Analying Transactions
debit balance - balance sheet - permanent - asset
debit balance - income statement - temporary - expense
to those willing to take time to understand it
Identify Accounts affected

29. Accumlated depreciation
each owner has its own books - records - financial statements that are seperate.
prepare post-closing trial balance
Contra Asset - noncurrent asset
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

30. 2nd step of Accounting Cycle
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.
Credit balance - income statement - temporary - revenues
prepare post-closing trial balance

31. Cash Principle
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
cost-salvage value/years of life
Revenues and Expenses
Debit Balance - Income Statement - Temporary - expense

32. Intangibles
credit balance - balance sheet - permanent - liabilities
debit balance - income statement - temporary - expense
copyright - long term assets - noncurrent
Close out all revenue and expense accounts into retained earnings.

33. Interest Expense
credit balance - income statement - temporary - Revenue
Revenues and Expenses
prepare adjusted trial balance
Debit Balance - Income Statement - temporary - Expense

34. Multistep Income Statement
an appraised value for land gives additional information that is useful to investors
debit balance - Balance sheet - Permanent - asset
prepare Unadjusted trial balance
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income

35. Calculating Interest Formula
Payment x Rate x Time
debit balance - Balance sheet - permanent - asset
longterm liabilities
prepare adjusted trial balance

36. Consistency
credit balance - income statement - temporary - Revenue
copyright - long term assets - noncurrent
a company uses the same method each year for calculating inventory
Assets - Liabilities - Equity

37. Accounting Equation
record transactions in general journal
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Contra Asset - noncurrent asset
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

38. Current Ratio
does the equation remain in balance?
Current Assets/Current Liabilities
each owner has its own books - records - financial statements that are seperate.
Identify Accounts affected

39. Accounts on Income Statement
Revenues and Expenses
debit balance - balance sheet - permanent - asset
Debit Balance - Income Statement - temporary - Expense
does the equation remain in balance?

40. Income Statement Revenues
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
Sales Revenues
record adjusting entries to general journal
record transactions in general journal

41. Relevance
similar to unearned revenue- liabilities
record adjusting entries to general journal
how we measure - assumes economic mean
an appraised value for land gives additional information that is useful to investors

42. NonCurrent Liabilities
longterm liabilities
decrease equity - debit balance
record transactions in general journal
does the equation remain in balance?

43. Balance Sheet Liabilities
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
wages payable - utilities payable - interest payable - unearned revenue - note payable
credit balance - balance sheet - permanent - liabilities
credit balance - balance sheet - permanent - liabilities

44. Prepaid insurance
Close out all revenue and expense accounts into retained earnings.
debit balance - balance sheet - permanent - asset
analyze transactions from external events
record adjusting entries to general journal

45. Sales revenue
credit balance - income statement - temporary - Revenue
Debit Balance - Retained Earnings - Temporary - Owners Equity
debit balance - balance sheet - permanent - asset
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

46. 9th step of Accounting Cycle
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Close out all revenue and expense accounts into retained earnings.
prepar journal to general ledger
prepare closing entry-post to general ledger

47. 2nd step of analyzing transactions
Credit Balance - Balance Sheet - permanent - liability
the original amount to purchase land is verifiable through the contract documents
prepare closing entry-post to general ledger
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

48. Materiality
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.
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Payment x Rate x Time

49. Conservatism
companies must reduce the value of land - if the value is lower than its original cost.
Credit Balance - Balance Sheet - Permanent - owners equity
decrease equity - debit balance
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

50. Closing Entries
prepare adjusted trial balance
prepar journal to general ledger
Assets - Liabilities - Equity
Close out all revenue and expense accounts into retained earnings.

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Business Accounting Basics

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