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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. Conservatism
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
debit balance - balance sheet - permanent - asset
prepare Unadjusted trial balance
companies must reduce the value of land - if the value is lower than its original cost.

2. Balance Sheet Assets
Credit balance - income statement - temporary - revenues
how we measure - assumes economic mean
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Debit Balance - Income Statement - temporary - Expense

3. Calculating Cost depreciation
prepare financial statements
cost-salvage value/years of life
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Credit Balance - Balance Sheet - permanent - liability

4. Dividends
Sales Revenues
Debit Balance - Retained Earnings - Temporary - Owners Equity
the original amount to purchase land is verifiable through the contract documents
post journal to general ledger

5. Cash Principle
debit balance - Balance sheet - permanent - asset
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 - owners equity
debit balance - income statement - temporary - expense

6. 7th 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
copyright - long term assets - noncurrent
Debit Balance - Balance sheet - permanent - asset
prepare adjusted trial balance

7. 3rd step of analyzing transactions
determine the direction of the effect. debit or credit
Sales Revenues
Identify Accounts affected
debit balance - Balance sheet - permanent - asset

8. Calculating Interest Formula
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
companies must reduce the value of land - if the value is lower than its original cost.
Payment x Rate x Time
to those willing to take time to understand it

9. Goodwill
prepare post-closing trial balance
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
debit balance - balance sheet - permanent - asset
Credit balance - income statement - temporary - revenues

10. Closing Entries
companies must reduce the value of land - if the value is lower than its original cost.
Assets - Liabilities - Equity
Close out all revenue and expense accounts into retained earnings.
Debit Balance - Balance sheet - permanent - asset

11. Customer deposits
Contributed Capital - Retained Earnings - Dividends
similar to unearned revenue- liabilities
debit balance - Balance sheet - permanent - asset
how we measure - assumes economic mean

12. Note Payable
Credit Balance - Balance Sheet - permanent - liability
prepare Unadjusted trial balance
Debit Balance - Retained Earnings - Temporary - Owners Equity
credit balance - income statement - temporary - Revenue

13. Common Stock
Credit balance - Balance sheet and Retained Earnings - Permanent
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 - owners equity

14. 2nd step of analyzing transactions
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
wages payable - utilities payable - interest payable - unearned revenue - note payable
Identify Accounts affected
prepare adjusted trial balance

15. Profit Margin %
decrease equity - debit balance
prepare post-closing trial balance
analyze transactions from external events
Net Income/Sales

16. 5th step of Accounting Cycle
Debit Balance - Income Statement - temporary - Expense
debit balance - income statement - temporary - expense
record adjusting entries to general journal
Payment x Rate x Time

17. Income Satement Expenses
debit balance - Balance sheet - permanent - asset
prepar journal to general ledger
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
record transactions in general journal

18. Inventory
longterm liabilities
determine the direction of the effect. debit or credit
debit balance - income statement - temporary - expense
debit balance - Balance sheet - permanent - asset

19. Calculating Net Income
Contra Asset - noncurrent asset
Revenues-Expenses
Revenues and Expenses
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

20. Balance sheet Equity
Contributed Capital - Retained Earnings - Dividends
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
determine the direction of the effect. debit or credit
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income

21. Interest Expense
Identify Accounts affected
prepare Unadjusted trial balance
Assets - Liabilities - Equity
Debit Balance - Income Statement - temporary - Expense

22. Building
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
Debit Balance - Income Statement - Temporary - expense
debit balance - Balance sheet - Permanent - asset
longterm liabilities

23. Accounting Equation
prepare closing entry-post to general ledger
determine the direction of the effect. debit or credit
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Contributed Capital - Retained Earnings - Dividends

24. Accts on Statement of Retained Earnings
prepare closing entry-post to general ledger
credit balance - balance sheet - permanent - liabilities
Retained earnings beg. balance - Net income - dividends.
Revenues-Expenses

25. 3rd step of Accounting Cycle
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
prepar journal to general ledger
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

26. NonCurrent Liabilities
debit balance - income statement - temporary - expense
longterm liabilities
analyze transactions from external events
similar to unearned revenue- liabilities

27. Prepaid insurance
longterm liabilities
prepare adjusted trial balance
each owner has its own books - records - financial statements that are seperate.
debit balance - balance sheet - permanent - asset

28. 2nd step of Accounting Cycle
record adjusting entries to general journal
record transactions in general journal
Debit Balance - Income Statement - temporary - Expense
credit balance - balance sheet - permanent - liabilities

29. Dividends
Credit balance - Balance sheet and Retained Earnings - Permanent
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
decrease equity - debit balance
debit balance - income statement - temporary - expense

30. 1st step of Accounting Cycle
analyze transactions from external events
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.
Identify Accounts affected

31. 4th step of Accounting Cycle
Close out all revenue and expense accounts into retained earnings.
debit balance - Balance sheet - Permanent - asset
the original amount to purchase land is verifiable through the contract documents
prepare Unadjusted trial balance

32. Accounts Recievable
cost-salvage value/years of life
an appraised value for land gives additional information that is useful to investors
a company uses the same method each year for calculating inventory
Debit Balance - Balance sheet - permanent - asset

33. Materiality

34. Retained Earnings
prepare Unadjusted trial balance
Credit balance - Balance sheet and Retained Earnings - Permanent
Sales Revenues
prepare adjusted trial balance

35. Current Assets
a company uses the same method each year for calculating inventory
(cash - accts revievable - inventory) turn into cash within 12 months
Credit Balance - Balance Sheet - Permanent - owners equity
record transactions in general journal

36. Understandability
prepare closing entry-post to general ledger
to those willing to take time to understand it
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
post journal to general ledger

37. Interest Revenue
Credit balance - income statement - temporary - revenues
each owner has its own books - records - financial statements that are seperate.
determine the direction of the effect. debit or credit
analyze transactions from external events

38. Income Statement Revenues
(long-term) assets (building - land - equipment)
Credit balance - income statement - temporary - revenues
Close out all revenue and expense accounts into retained earnings.
Sales Revenues

39. 8th step of Accounting Cycle
Debit Balance - Balance sheet - permanent - asset
prepare financial statements
Debit Balance - Income Statement - Temporary - expense
debit balance - balance sheet - permanent - asset

40. Economic Equity
Debit Balance - Balance sheet - permanent - asset
each owner has its own books - records - financial statements that are seperate.
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
a company uses the same method each year for calculating inventory

41. Accounts on Income Statement
Debit Balance - Balance sheet - permanent - asset
Sales Revenues
(long-term) assets (building - land - equipment)
Revenues and Expenses

42. Going Concern
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
a company uses the same method each year for calculating inventory
Debit Balance - Balance sheet - permanent - asset
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

43. Sales revenue
the original amount to purchase land is verifiable through the contract documents
credit balance - income statement - temporary - Revenue
Sales Revenues
Retained earnings beg. balance - Net income - dividends.

44. NonCurrent Assets
Assets - Liabilities - Equity
(long-term) assets (building - land - equipment)
debit balance - balance sheet - permanent - asset
decrease equity - debit balance

45. 1st Step of Analying Transactions
Identify Accounts affected
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
prepar journal to general ledger

46. Intangibles
Credit balance - income statement - temporary - revenues
record adjusting entries to general journal
prepare financial statements
copyright - long term assets - noncurrent

47. Balance Sheet Liabilities
credit balance - balance sheet - permanent - liabilities
Retained earnings beg. balance - Net income - dividends.
wages payable - utilities payable - interest payable - unearned revenue - note payable
prepare closing entry-post to general ledger

48. Multistep Income Statement
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
prepare financial statements
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

49. 9th step of Accounting Cycle
prepare closing entry-post to general ledger
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
an appraised value for land gives additional information that is useful to investors

50. 10th step of Accounting Cycle
prepare post-closing trial balance
credit balance - balance sheet - permanent - liabilities
analyze transactions from external events
record adjusting entries to general journal