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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. 4th step of Accounting Cycle
Debit Balance - Income Statement - Temporary - expense
prepare Unadjusted trial balance
debit balance - income statement - temporary - expense
Credit balance - Balance sheet and Retained Earnings - Permanent

2. Monetary Unit
how we measure - assumes economic mean
prepare adjusted trial balance
Current Assets/Current Liabilities
analyze transactions from external events

3. Cost of Goods Sold
prepare post-closing trial balance
Debit Balance - Income Statement - Temporary - expense
Sales Revenues
Revenues and Expenses

4. 9th step of Accounting Cycle
(long-term) assets (building - land - equipment)
prepare closing entry-post to general ledger
the original amount to purchase land is verifiable through the contract documents
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

5. 2nd step of analyzing transactions
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Credit Balance - Balance Sheet - permanent - liability
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
cost-salvage value/years of life

6. NonCurrent Liabilities
Retained earnings beg. balance - Net income - dividends.
to those willing to take time to understand it
Debit Balance - Income Statement - Temporary - expense
longterm liabilities

7. Materiality

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8. Conservatism
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
wages payable - utilities payable - interest payable - unearned revenue - note payable
Revenues and Expenses
companies must reduce the value of land - if the value is lower than its original cost.

9. Income Statement Revenues
analyze transactions from external events
similar to unearned revenue- liabilities
Sales Revenues
prepare adjusted trial balance

10. Intangibles
copyright - long term assets - noncurrent
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Credit balance - Balance sheet and Retained Earnings - Permanent
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

11. Closing Entries
how we measure - assumes economic mean
debit balance - income statement - temporary - expense
Close out all revenue and expense accounts into retained earnings.
Debit Balance - Retained Earnings - Temporary - Owners Equity

12. Goodwill
Credit Balance - Balance Sheet - permanent - liability
debit balance - balance sheet - permanent - asset
debit balance - income statement - temporary - expense
Sales Revenues

13. Prepaid insurance
companies must reduce the value of land - if the value is lower than its original cost.
determine the direction of the effect. debit or credit
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.

14. Current Assets
record adjusting entries to general journal
Credit balance - Balance sheet and Retained Earnings - Permanent
(cash - accts revievable - inventory) turn into cash within 12 months
Current Assets/Current Liabilities

15. Balance Sheet Assets
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
prepar journal to general ledger
Credit Balance - Balance Sheet - Permanent - owners equity
Net Income/Sales

16. Profit Margin %
a company uses the same method each year for calculating inventory
Net Income/Sales
analyze transactions from external events
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

17. Accumlated depreciation
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
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
post journal to general ledger

18. 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
cost-salvage value/years of life
analyze transactions from external events
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

19. Dividends
Payment x Rate x Time
debit balance - balance sheet - permanent - asset
debit balance - income statement - temporary - expense
decrease equity - debit balance

20. Interest Revenue
Credit balance - income statement - temporary - revenues
Debit Balance - Income Statement - temporary - Expense
Identify Accounts affected
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

21. Sales revenue
prepare Unadjusted trial balance
Net Income/Sales
debit balance - balance sheet - permanent - asset
credit balance - income statement - temporary - Revenue

22. Accounts on Income Statement
Contributed Capital - Retained Earnings - Dividends
Revenues-Expenses
debit balance - income statement - temporary - expense
Revenues and Expenses

23. Income Satement Expenses
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
(cash - accts revievable - inventory) turn into cash within 12 months
Credit balance - Balance sheet and Retained Earnings - Permanent
Debit Balance - Balance sheet - permanent - asset

24. Going Concern
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Sales Revenues
prepare post-closing trial balance

25. Calculating Cost depreciation
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
post journal to general ledger
similar to unearned revenue- liabilities
cost-salvage value/years of life

26. 8th step of Accounting Cycle
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
prepare financial statements
credit balance - balance sheet - permanent - liabilities
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

27. Calculating Net Income
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Debit Balance - Balance sheet - permanent - asset
Revenues-Expenses
an appraised value for land gives additional information that is useful to investors

28. Retained Earnings
Credit balance - Balance sheet and Retained Earnings - Permanent
credit balance - balance sheet - permanent - liabilities
debit balance - Balance sheet - Permanent - asset
prepare adjusted trial balance

29. 1st step of Accounting Cycle
analyze transactions from external events
Net Income/Sales
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Current Assets/Current Liabilities

30. Note Payable
Net Income/Sales
analyze transactions from external events
Retained earnings beg. balance - Net income - dividends.
Credit Balance - Balance Sheet - permanent - liability

31. Balance Sheet Liabilities
a company uses the same method each year for calculating inventory
wages payable - utilities payable - interest payable - unearned revenue - note payable
Net Income/Sales
Sales Revenues

32. Customer deposits
(long-term) assets (building - land - equipment)
similar to unearned revenue- liabilities
Assets - Liabilities - Equity
Close out all revenue and expense accounts into retained earnings.

33. NonCurrent Assets
(long-term) assets (building - land - equipment)
(cash - accts revievable - inventory) turn into cash within 12 months
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

34. Common Stock
Credit Balance - Balance Sheet - Permanent - owners equity
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
does the equation remain in balance?
each owner has its own books - records - financial statements that are seperate.

35. Accts on Statement of Retained Earnings
Retained earnings beg. balance - Net income - dividends.
prepare adjusted trial balance
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

36. 1st Step of Analying Transactions
Identify Accounts affected
record adjusting entries to general journal
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.

37. 5th step of Accounting Cycle
prepare financial statements
Close out all revenue and expense accounts into retained earnings.
record adjusting entries to general journal
debit balance - balance sheet - permanent - asset

38. Understandability
to those willing to take time to understand it
credit balance - income statement - temporary - Revenue
debit balance - balance sheet - permanent - asset
debit balance - balance sheet - permanent - asset

39. Calculating Interest Formula
Payment x Rate x Time
credit balance - income statement - temporary - Revenue
Credit balance - income statement - temporary - revenues
Identify Accounts affected

40. 3rd step of analyzing transactions
credit balance - balance sheet - permanent - liabilities
a company uses the same method each year for calculating inventory
determine the direction of the effect. debit or credit
debit balance - Balance sheet - Permanent - asset

41. Dividends
debit balance - balance sheet - permanent - asset
Identify Accounts affected
Debit Balance - Retained Earnings - Temporary - Owners Equity
Contra Asset - noncurrent asset

42. 6th step of Accounting Cycle
Payment x Rate x Time
Sales Revenues
post journal to general ledger
(cash - accts revievable - inventory) turn into cash within 12 months

43. Building
debit balance - income statement - temporary - expense
cost-salvage value/years of life
Credit balance - Balance sheet and Retained Earnings - Permanent
debit balance - Balance sheet - Permanent - asset

44. 7th step of Accounting Cycle
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
copyright - long term assets - noncurrent
Identify Accounts affected
prepare adjusted trial balance

45. Economic Equity
each owner has its own books - records - financial statements that are seperate.
similar to unearned revenue- liabilities
copyright - long term assets - noncurrent
prepare financial statements

46. Unearned revenue
prepare Unadjusted trial balance
Net Income/Sales
Debit Balance - Retained Earnings - Temporary - Owners Equity
credit balance - balance sheet - permanent - liabilities

47. 2nd step of Accounting Cycle
each owner has its own books - records - financial statements that are seperate.
record transactions in general journal
copyright - long term assets - noncurrent
credit balance - income statement - temporary - Revenue

48. Accts on balance sheet
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Current Assets/Current Liabilities
Assets - Liabilities - Equity
Credit Balance - Balance Sheet - permanent - liability

49. Consistency
a company uses the same method each year for calculating inventory
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
how we measure - assumes economic mean
Credit balance - Balance sheet and Retained Earnings - Permanent

50. Relevance
decrease equity - debit balance
Close out all revenue and expense accounts into retained earnings.
debit balance - Balance sheet - permanent - asset
an appraised value for land gives additional information that is useful to investors