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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. Cash Principle
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Revenues-Expenses
debit balance - Balance sheet - Permanent - asset
how we measure - assumes economic mean

2. Accts on balance sheet
the original amount to purchase land is verifiable through the contract documents
Credit balance - Balance sheet and Retained Earnings - Permanent
Assets - Liabilities - Equity
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

3. Accounts Recievable
Debit Balance - Balance sheet - permanent - asset
credit balance - income statement - temporary - Revenue
Payment x Rate x Time
an appraised value for land gives additional information that is useful to investors

4. 9th step of Accounting Cycle
prepare closing entry-post to general ledger
Credit Balance - Balance Sheet - Permanent - owners equity
credit balance - income statement - temporary - Revenue
companies must reduce the value of land - if the value is lower than its original cost.

5. Going Concern
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
companies must reduce the value of land - if the value is lower than its original cost.
copyright - long term assets - noncurrent
debit balance - Balance sheet - permanent - asset

6. Accts on Statement of Retained Earnings
Credit balance - Balance sheet and Retained Earnings - Permanent
Retained earnings beg. balance - Net income - dividends.
cost-salvage value/years of life
Current Assets/Current Liabilities

7. Accumlated depreciation
prepare financial statements
an appraised value for land gives additional information that is useful to investors
Contra Asset - noncurrent asset
does the equation remain in balance?

8. 4th step of Accounting Cycle
prepare Unadjusted trial balance
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
does the equation remain in balance?

9. Dividends
longterm liabilities
debit balance - Balance sheet - Permanent - asset
Debit Balance - Retained Earnings - Temporary - Owners Equity
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

10. Closing Entries
Close out all revenue and expense accounts into retained earnings.
the original amount to purchase land is verifiable through the contract documents
Revenues-Expenses
Debit Balance - Balance sheet - permanent - asset

11. 6th step of Accounting Cycle
post journal to general ledger
determine the direction of the effect. debit or credit
Credit Balance - Balance Sheet - permanent - liability
Contra Asset - noncurrent asset

12. Customer deposits
Credit Balance - Balance Sheet - Permanent - owners equity
similar to unearned revenue- liabilities
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
longterm liabilities

13. Accounting Equation
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
cost-salvage value/years of life
Sales Revenues
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

14. Profit Margin %
Net Income/Sales
longterm liabilities
debit balance - Balance sheet - Permanent - asset
Assets - Liabilities - Equity

15. Unearned revenue
credit balance - balance sheet - permanent - liabilities
prepare financial statements
post journal to general ledger
each owner has its own books - records - financial statements that are seperate.

16. Sales revenue
Revenues and Expenses
Credit balance - income statement - temporary - revenues
debit balance - balance sheet - permanent - asset
credit balance - income statement - temporary - Revenue

17. Balance Sheet Liabilities
each owner has its own books - records - financial statements that are seperate.
wages payable - utilities payable - interest payable - unearned revenue - note payable
(cash - accts revievable - inventory) turn into cash within 12 months
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

18. Income Statement Revenues
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
debit balance - income statement - temporary - expense
Sales Revenues
determine the direction of the effect. debit or credit

19. Income Satement Expenses
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Revenues-Expenses
Retained earnings beg. balance - Net income - dividends.
record adjusting entries to general journal

20. 3rd step of Accounting Cycle
Assets - Liabilities - Equity
prepar journal to general ledger
the original amount to purchase land is verifiable through the contract documents
prepare financial statements

21. 10th step of Accounting Cycle
prepare post-closing trial balance
debit balance - balance sheet - permanent - asset
Close out all revenue and expense accounts into retained earnings.
companies must reduce the value of land - if the value is lower than its original cost.

22. Interest Revenue
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
prepare closing entry-post to general ledger
an appraised value for land gives additional information that is useful to investors
Credit balance - income statement - temporary - revenues

23. Prepaid insurance
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
debit balance - balance sheet - permanent - asset
Current Assets/Current Liabilities
prepare closing entry-post to general ledger

24. 7th step of Accounting Cycle
record adjusting entries to 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.
the original amount to purchase land is verifiable through the contract documents
prepare adjusted trial balance

25. Conservatism
companies must reduce the value of land - if the value is lower than its original cost.
prepare closing entry-post to general ledger
Current Assets/Current Liabilities
Credit Balance - Balance Sheet - permanent - liability

26. Consistency
a company uses the same method each year for calculating inventory
Payment x Rate x Time
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Retained earnings beg. balance - Net income - dividends.

27. Retained Earnings
Credit balance - Balance sheet and Retained Earnings - Permanent
Retained earnings beg. balance - Net income - dividends.
Close out all revenue and expense accounts into retained earnings.
a company uses the same method each year for calculating inventory

28. Accumulated depriciation
credit balance - balance sheet - permanent - liabilities
analyze transactions from external events
Credit balance - Balance sheet and Retained Earnings - Permanent
(cash - accts revievable - inventory) turn into cash within 12 months

29. Utilities 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.
credit balance - income statement - temporary - Revenue
debit balance - income statement - temporary - expense

30. 4th step of analyzing transactions
does the equation remain in balance?
prepare adjusted trial balance
prepare closing entry-post to general ledger
Credit balance - income statement - temporary - revenues

31. Note Payable
Credit Balance - Balance Sheet - Permanent - owners equity
debit balance - Balance sheet - permanent - asset
Credit Balance - Balance Sheet - permanent - liability
prepar journal to general ledger

32. NonCurrent Assets
Current Assets/Current Liabilities
Debit Balance - Income Statement - temporary - Expense
how we measure - assumes economic mean
(long-term) assets (building - land - equipment)

33. 5th step of Accounting Cycle
Debit Balance - Balance sheet - permanent - asset
record adjusting entries to general journal
debit balance - Balance sheet - Permanent - asset
prepare closing entry-post to general ledger

34. Monetary Unit
Credit Balance - Balance Sheet - permanent - liability
copyright - long term assets - noncurrent
how we measure - assumes economic mean
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

35. Common Stock
Revenues and Expenses
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Credit Balance - Balance Sheet - Permanent - owners equity
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

36. 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
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
prepare adjusted trial balance
Contributed Capital - Retained Earnings - Dividends

37. Understandability
companies must reduce the value of land - if the value is lower than its original cost.
credit balance - balance sheet - permanent - liabilities
analyze transactions from external events
to those willing to take time to understand it

38. Current Assets
record transactions in general journal
to those willing to take time to understand it
(cash - accts revievable - inventory) turn into cash within 12 months
Credit balance - income statement - temporary - revenues

39. NonCurrent Liabilities
longterm liabilities
debit balance - income statement - temporary - expense
debit balance - Balance sheet - Permanent - asset
debit balance - balance sheet - permanent - asset

40. Current Ratio
Contributed Capital - Retained Earnings - Dividends
debit balance - balance sheet - permanent - asset
a company uses the same method each year for calculating inventory
Current Assets/Current Liabilities

41. Balance Sheet Assets
Payment x Rate x Time
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.
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

42. 8th step of Accounting Cycle
an appraised value for land gives additional information that is useful to investors
prepare financial statements
debit balance - balance sheet - permanent - asset
to those willing to take time to understand it

43. Balance sheet Equity
analyze transactions from external events
Contributed Capital - Retained Earnings - Dividends
Payment x Rate x Time
longterm liabilities

44. Inventory
Close out all revenue and expense accounts into retained earnings.
Net Income/Sales
debit balance - Balance sheet - permanent - asset
Contra Asset - noncurrent asset

45. Goodwill
debit balance - balance sheet - permanent - asset
Debit Balance - Income Statement - Temporary - expense
Current Assets/Current Liabilities
Close out all revenue and expense accounts into retained earnings.

46. Relevance
an appraised value for land gives additional information that is useful to investors
wages payable - utilities payable - interest payable - unearned revenue - note payable
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
debit balance - balance sheet - permanent - asset

47. Cost of Goods Sold
(cash - accts revievable - inventory) turn into cash within 12 months
credit balance - balance sheet - permanent - liabilities
Debit Balance - Income Statement - Temporary - expense
Contra Asset - noncurrent asset

48. Calculating Net Income
debit balance - balance sheet - permanent - asset
Revenues-Expenses
does the equation remain in balance?
Sales Revenues

49. 1st step of Accounting Cycle
analyze transactions from external events
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
each owner has its own books - records - financial statements that are seperate.
longterm liabilities

50. Intangibles
(long-term) assets (building - land - equipment)
Assets - Liabilities - Equity
copyright - long term assets - noncurrent
Debit Balance - Income Statement - Temporary - expense