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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. 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
longterm liabilities
Credit balance - Balance sheet and Retained Earnings - Permanent
debit balance - Balance sheet - Permanent - asset

2. Closing Entries
debit balance - Balance sheet - Permanent - asset
Close out all revenue and expense accounts into retained earnings.
Revenues-Expenses
longterm liabilities

3. Utilities expense
(cash - accts revievable - inventory) turn into cash within 12 months
Current Assets/Current Liabilities
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
debit balance - income statement - temporary - expense

4. Calculating Net Income
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Contra Asset - noncurrent asset
(cash - accts revievable - inventory) turn into cash within 12 months
Revenues-Expenses

5. 7th step of Accounting Cycle
copyright - long term assets - noncurrent
prepare adjusted trial balance
credit balance - balance sheet - permanent - liabilities
prepar journal to general ledger

6. Dividends
Net Income/Sales
Revenues and Expenses
decrease equity - debit balance
record adjusting entries to general journal

7. NonCurrent Assets
Revenues and Expenses
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
longterm liabilities
(long-term) assets (building - land - equipment)

8. Interest Expense
prepare adjusted trial balance
Debit Balance - Income Statement - temporary - Expense
Identify Accounts affected
Credit Balance - Balance Sheet - Permanent - owners equity

9. 10th step of Accounting Cycle
Debit Balance - Income Statement - Temporary - expense
each owner has its own books - records - financial statements that are seperate.
prepare post-closing trial balance
Contra Asset - noncurrent asset

10. Prepaid insurance
Net Income/Sales
debit balance - balance sheet - permanent - asset
to those willing to take time to understand it
an appraised value for land gives additional information that is useful to investors

11. Cost of Goods Sold
Debit Balance - Retained Earnings - Temporary - Owners Equity
Debit Balance - Income Statement - Temporary - expense
prepare Unadjusted trial balance
Revenues and Expenses

12. Current Ratio
Current Assets/Current Liabilities
Revenues and Expenses
Identify Accounts affected
prepare adjusted trial balance

13. 8th step of Accounting Cycle
Current Assets/Current Liabilities
Debit Balance - Income Statement - Temporary - expense
Net Income/Sales
prepare financial statements

14. Relevance
Net Income/Sales
an appraised value for land gives additional information that is useful to investors
prepare financial statements
longterm liabilities

15. Accts on balance sheet
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Assets - Liabilities - Equity
Close out all revenue and expense accounts into retained earnings.
Contributed Capital - Retained Earnings - Dividends

16. 5th step of Accounting Cycle
record adjusting entries to general journal
the original amount to purchase land is verifiable through the contract documents
longterm liabilities
copyright - long term assets - noncurrent

17. Interest Revenue
debit balance - income statement - temporary - expense
prepare adjusted trial balance
Credit balance - income statement - temporary - revenues
post journal to general ledger

18. Understandability
longterm liabilities
to those willing to take time to understand it
wages payable - utilities payable - interest payable - unearned revenue - note payable
Debit Balance - Income Statement - temporary - Expense

19. 1st Step of Analying Transactions
Contributed Capital - Retained Earnings - Dividends
wages payable - utilities payable - interest payable - unearned revenue - note payable
Identify Accounts affected
credit balance - income statement - temporary - Revenue

20. Materiality

21. Balance sheet Equity
each owner has its own books - records - financial statements that are seperate.
Contributed Capital - Retained Earnings - Dividends
Credit balance - Balance sheet and Retained Earnings - Permanent
credit balance - balance sheet - permanent - liabilities

22. Accumulated depriciation
debit balance - income statement - temporary - expense
Net Income/Sales
wages payable - utilities payable - interest payable - unearned revenue - note payable
credit balance - balance sheet - permanent - liabilities

23. 3rd step of analyzing transactions
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Contributed Capital - Retained Earnings - Dividends
determine the direction of the effect. debit or credit
prepare closing entry-post to general ledger

24. 3rd step of Accounting Cycle
prepare financial statements
companies must reduce the value of land - if the value is lower than its original cost.
how we measure - assumes economic mean
prepar journal to general ledger

25. Common Stock
Credit Balance - Balance Sheet - Permanent - owners equity
Revenues-Expenses
determine the direction of the effect. debit or credit
record adjusting entries to general journal

26. Intangibles
(long-term) assets (building - land - equipment)
debit balance - Balance sheet - permanent - asset
copyright - long term assets - noncurrent
Credit Balance - Balance Sheet - Permanent - owners equity

27. Balance Sheet Assets
to those willing to take time to understand it
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
determine the direction of the effect. debit or credit
Debit Balance - Retained Earnings - Temporary - Owners Equity

28. 2nd step of analyzing transactions
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
longterm liabilities
does the equation remain in balance?
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

29. Accumlated depreciation
Contra Asset - noncurrent asset
Identify Accounts affected
Credit balance - Balance sheet and Retained Earnings - Permanent
analyze transactions from external events

30. Dividends
Contributed Capital - Retained Earnings - Dividends
Debit Balance - Retained Earnings - Temporary - Owners Equity
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
the original amount to purchase land is verifiable through the contract documents

31. Note Payable
Credit Balance - Balance Sheet - permanent - liability
prepare financial statements
each owner has its own books - records - financial statements that are seperate.
record transactions in general journal

32. 4th step of Accounting Cycle
Credit Balance - Balance Sheet - permanent - liability
prepare Unadjusted trial balance
Contributed Capital - Retained Earnings - Dividends
Revenues and Expenses

33. Calculating Cost depreciation
Sales Revenues
to those willing to take time to understand it
cost-salvage value/years of life
(cash - accts revievable - inventory) turn into cash within 12 months

34. Sales revenue
Net Income/Sales
decrease equity - debit balance
debit balance - balance sheet - permanent - asset
credit balance - income statement - temporary - Revenue

35. Retained Earnings
debit balance - Balance sheet - permanent - asset
Credit balance - Balance sheet and Retained Earnings - Permanent
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
a company uses the same method each year for calculating inventory

36. Balance Sheet Liabilities
wages payable - utilities payable - interest payable - unearned revenue - note payable
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
credit balance - income statement - temporary - Revenue
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

37. Accts on Statement of Retained Earnings
a company uses the same method each year for calculating inventory
(long-term) assets (building - land - equipment)
debit balance - balance sheet - permanent - asset
Retained earnings beg. balance - Net income - dividends.

38. 4th step of analyzing transactions
does the equation remain in balance?
post journal to general ledger
Credit Balance - Balance Sheet - Permanent - owners equity
credit balance - income statement - temporary - Revenue

39. Income Statement Revenues
each owner has its own books - records - financial statements that are seperate.
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Sales Revenues
longterm liabilities

40. 1st step of Accounting Cycle
analyze transactions from external events
the original amount to purchase land is verifiable through the contract documents
Assets - Liabilities - Equity
record adjusting entries to general journal

41. Going Concern
Revenues and Expenses
the original amount to purchase land is verifiable through the contract documents
decrease equity - debit balance
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

42. NonCurrent Liabilities
companies must reduce the value of land - if the value is lower than its original cost.
record adjusting entries to general journal
longterm liabilities
the original amount to purchase land is verifiable through the contract documents

43. Inventory
Contra Asset - noncurrent asset
(cash - accts revievable - inventory) turn into cash within 12 months
Contributed Capital - Retained Earnings - Dividends
debit balance - Balance sheet - permanent - asset

44. Monetary Unit
Credit balance - income statement - temporary - revenues
how we measure - assumes economic mean
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
does the equation remain in balance?

45. 9th step of Accounting Cycle
record transactions in general journal
prepare closing entry-post to general ledger
credit balance - balance sheet - permanent - liabilities
debit balance - Balance sheet - permanent - asset

46. 6th step of Accounting Cycle
Close out all revenue and expense accounts into retained earnings.
post journal to general ledger
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
Revenues-Expenses

47. Building
prepar journal to general ledger
Credit balance - Balance sheet and Retained Earnings - Permanent
Credit balance - income statement - temporary - revenues
debit balance - Balance sheet - Permanent - asset

48. Current Assets
(cash - accts revievable - inventory) turn into cash within 12 months
Revenues and Expenses
longterm liabilities
Debit Balance - Balance sheet - permanent - asset

49. Consistency
Credit balance - Balance sheet and Retained Earnings - Permanent
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
similar to unearned revenue- liabilities
a company uses the same method each year for calculating inventory

50. Goodwill
debit balance - balance sheet - permanent - asset
similar to unearned revenue- liabilities
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Identify Accounts affected