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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. Goodwill
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
prepare adjusted trial balance
Revenues-Expenses
debit balance - balance sheet - permanent - asset

2. 1st Step of Analying Transactions
longterm liabilities
Identify Accounts affected
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
Sales Revenues

3. 6th step of Accounting Cycle
to those willing to take time to understand it
post journal to general ledger
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Contra Asset - noncurrent asset

4. 2nd step of analyzing transactions
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Assets - Liabilities - Equity
Contributed Capital - Retained Earnings - Dividends
prepare Unadjusted trial balance

5. Inventory
prepare post-closing trial balance
an appraised value for land gives additional information that is useful to investors
credit balance - income statement - temporary - Revenue
debit balance - Balance sheet - permanent - asset

6. Closing Entries
Debit Balance - Retained Earnings - Temporary - Owners Equity
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
Close out all revenue and expense accounts into retained earnings.
prepare closing entry-post to general ledger

7. Accounting Equation
Payment x Rate x Time
similar to unearned revenue- liabilities
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.

8. Customer deposits
Assets - Liabilities - Equity
Revenues-Expenses
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
similar to unearned revenue- liabilities

9. Interest Revenue
Debit Balance - Income Statement - Temporary - expense
credit balance - balance sheet - permanent - liabilities
each owner has its own books - records - financial statements that are seperate.
Credit balance - income statement - temporary - revenues

10. Dividends
to those willing to take time to understand it
Debit Balance - Retained Earnings - Temporary - Owners Equity
Credit Balance - Balance Sheet - permanent - liability
decrease equity - debit balance

11. Current Assets
(cash - accts revievable - inventory) turn into cash within 12 months
an appraised value for land gives additional information that is useful to investors
Close out all revenue and expense accounts into retained earnings.
debit balance - balance sheet - permanent - asset

12. Current Ratio
Current Assets/Current Liabilities
Assets - Liabilities - Equity
Net Income/Sales
Credit Balance - Balance Sheet - permanent - liability

13. Relevance
Identify Accounts affected
Contributed Capital - Retained Earnings - Dividends
an appraised value for land gives additional information that is useful to investors
Credit balance - Balance sheet and Retained Earnings - Permanent

14. NonCurrent Liabilities
Debit Balance - Balance sheet - permanent - asset
longterm liabilities
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.

15. Calculating Cost depreciation
cost-salvage value/years of life
the original amount to purchase land is verifiable through the contract documents
prepare closing entry-post to general ledger
Credit balance - income statement - temporary - revenues

16. 4th step of analyzing transactions
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
Sales Revenues
does the equation remain in balance?
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

17. 3rd step of analyzing transactions
Assets - Liabilities - Equity
determine the direction of the effect. debit or credit
Close out all revenue and expense accounts into retained earnings.
Credit Balance - Balance Sheet - Permanent - owners equity

18. Profit Margin %
Contributed Capital - Retained Earnings - Dividends
does the equation remain in balance?
debit balance - Balance sheet - permanent - asset
Net Income/Sales

19. 2nd step of Accounting Cycle
companies must reduce the value of land - if the value is lower than its original cost.
record transactions in general journal
Contributed Capital - Retained Earnings - Dividends
debit balance - balance sheet - permanent - asset

20. Accumlated depreciation
Contra Asset - noncurrent asset
post journal to general ledger
Identify Accounts affected
Revenues-Expenses

21. 10th step of Accounting Cycle
Credit Balance - Balance Sheet - Permanent - owners equity
Sales Revenues
prepare post-closing trial balance
post journal to general ledger

22. 1st step of Accounting Cycle
Revenues-Expenses
Credit balance - income statement - temporary - revenues
Credit Balance - Balance Sheet - Permanent - owners equity
analyze transactions from external events

23. Economic Equity
the original amount to purchase land is verifiable through the contract documents
each owner has its own books - records - financial statements that are seperate.
record transactions in general journal
how we measure - assumes economic mean

24. Balance sheet Equity
Revenues-Expenses
the original amount to purchase land is verifiable through the contract documents
post journal to general ledger
Contributed Capital - Retained Earnings - Dividends

25. Note Payable
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Credit Balance - Balance Sheet - permanent - liability
debit balance - balance sheet - permanent - asset
does the equation remain in balance?

26. 5th step of Accounting Cycle
debit balance - income statement - temporary - expense
cost-salvage value/years of life
record adjusting entries to general journal
prepare financial statements

27. Dividends
debit balance - Balance sheet - Permanent - asset
Debit Balance - Retained Earnings - Temporary - Owners Equity
Payment x Rate x Time
prepar journal to general ledger

28. Conservatism
to those willing to take time to understand it
companies must reduce the value of land - if the value is lower than its original cost.
debit balance - balance sheet - permanent - asset
cost-salvage value/years of life

29. Accounts on Income Statement
debit balance - balance sheet - permanent - asset
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Revenues and Expenses
prepare financial statements

30. Cash Principle
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.
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
to those willing to take time to understand it

31. Building
debit balance - Balance sheet - Permanent - asset
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
cost-salvage value/years of life
Credit balance - income statement - temporary - revenues

32. Calculating Net Income
how we measure - assumes economic mean
Debit Balance - Retained Earnings - Temporary - Owners Equity
Revenues-Expenses
the original amount to purchase land is verifiable through the contract documents

33. Understandability
prepare adjusted trial balance
to those willing to take time to understand it
prepar journal to general ledger
analyze transactions from external events

34. Utilities expense
Credit balance - Balance sheet and Retained Earnings - Permanent
debit balance - income statement - temporary - expense
copyright - long term assets - noncurrent
Contributed Capital - Retained Earnings - Dividends

35. 9th step of Accounting Cycle
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
an appraised value for land gives additional information that is useful to investors
prepare closing entry-post to general ledger
companies must reduce the value of land - if the value is lower than its original cost.

36. Accts on balance sheet
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 - Equity
wages payable - utilities payable - interest payable - unearned revenue - note payable
Credit Balance - Balance Sheet - permanent - liability

37. Interest Expense
Debit Balance - Income Statement - temporary - Expense
to those willing to take time to understand it
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
determine the direction of the effect. debit or credit

38. Accumulated depriciation
each owner has its own books - records - financial statements that are seperate.
credit balance - balance sheet - permanent - liabilities
Debit Balance - Income Statement - temporary - Expense
prepare Unadjusted trial balance

39. Cost of Goods Sold
Sales Revenues
Debit Balance - Income Statement - Temporary - expense
Debit Balance - Retained Earnings - Temporary - Owners Equity
decrease equity - debit balance

40. Accts on Statement of Retained Earnings
similar to unearned revenue- liabilities
longterm liabilities
Debit Balance - Retained Earnings - Temporary - Owners Equity
Retained earnings beg. balance - Net income - dividends.

41. Monetary Unit
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
to those willing to take time to understand it
how we measure - assumes economic mean
Payment x Rate x Time

42. Materiality

43. Consistency
a company uses the same method each year for calculating inventory
Retained earnings beg. balance - Net income - dividends.
credit balance - balance sheet - permanent - liabilities
companies must reduce the value of land - if the value is lower than its original cost.

44. Intangibles
copyright - long term assets - noncurrent
prepar journal to general ledger
debit balance - balance sheet - permanent - asset
Debit Balance - Balance sheet - permanent - asset

45. NonCurrent Assets
Debit Balance - Income Statement - temporary - Expense
(cash - accts revievable - inventory) turn into cash within 12 months
(long-term) assets (building - land - equipment)
Debit Balance - Balance sheet - permanent - asset

46. 4th step of Accounting Cycle
prepare Unadjusted trial balance
(cash - accts revievable - inventory) turn into cash within 12 months
debit balance - Balance sheet - Permanent - asset
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

47. 8th step of Accounting Cycle
cost-salvage value/years of life
Credit Balance - Balance Sheet - Permanent - owners equity
prepare financial statements
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

48. Reliability
Retained earnings beg. balance - Net income - dividends.
how we measure - assumes economic mean
Credit Balance - Balance Sheet - Permanent - owners equity
the original amount to purchase land is verifiable through the contract documents

49. Calculating Interest Formula
credit balance - balance sheet - permanent - liabilities
how we measure - assumes economic mean
Payment x Rate x Time
Debit Balance - Income Statement - Temporary - expense

50. Prepaid insurance
Credit Balance - Balance Sheet - permanent - liability
debit balance - balance sheet - permanent - asset
prepare closing entry-post to general ledger
Sales Revenues