Test your basic knowledge |

Business Accounting Basics

Instructions:

Answer 50 questions in 15 minutes.
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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. Current Assets
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
(cash - accts revievable - inventory) turn into cash within 12 months
credit balance - balance sheet - permanent - liabilities
prepare financial statements

2. Monetary Unit
cost-salvage value/years of life
each owner has its own books - records - financial statements that are seperate.
how we measure - assumes economic mean
longterm liabilities

3. Closing Entries
prepare Unadjusted trial balance
Contra Asset - noncurrent asset
analyze transactions from external events
Close out all revenue and expense accounts into retained earnings.

4. Balance sheet Equity
credit balance - income statement - temporary - Revenue
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Contributed Capital - Retained Earnings - Dividends
companies must reduce the value of land - if the value is lower than its original cost.

5. 10th step of Accounting Cycle
Credit Balance - Balance Sheet - permanent - liability
Assets - Liabilities - Equity
prepare post-closing trial balance
credit balance - balance sheet - permanent - liabilities

6. Economic Equity
post journal to general ledger
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.
prepare adjusted trial balance

7. Income Statement Revenues
Sales Revenues
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
record adjusting entries to general journal
(cash - accts revievable - inventory) turn into cash within 12 months

8. Unearned revenue
Revenues-Expenses
credit balance - balance sheet - permanent - liabilities
to those willing to take time to understand it
each owner has its own books - records - financial statements that are seperate.

9. Inventory
does the equation remain in balance?
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.
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

10. Calculating Net Income
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Revenues-Expenses
similar to unearned revenue- liabilities
companies must reduce the value of land - if the value is lower than its original cost.

11. Accounting Equation
determine the direction of the effect. debit or credit
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
how we measure - assumes economic mean

12. Conservatism
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Identify Accounts affected
companies must reduce the value of land - if the value is lower than its original cost.
prepare post-closing trial balance

13. Cost of Goods Sold
prepare adjusted trial balance
Debit Balance - Income Statement - Temporary - expense
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

14. Consistency
cost-salvage value/years of life
a company uses the same method each year for calculating inventory
Credit balance - Balance sheet and Retained Earnings - Permanent
prepar journal to general ledger

15. Intangibles
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
Debit Balance - Balance sheet - permanent - asset
prepare Unadjusted trial balance

16. Common Stock
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Credit Balance - Balance Sheet - Permanent - owners equity
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
debit balance - Balance sheet - permanent - asset

17. Accumulated depriciation
analyze transactions from external events
the original amount to purchase land is verifiable through the contract documents
credit balance - balance sheet - permanent - liabilities
Credit Balance - Balance Sheet - permanent - liability

18. Accounts on Income Statement
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
prepare Unadjusted trial balance
Revenues and Expenses
the original amount to purchase land is verifiable through the contract documents

19. Materiality
an appraised value for land gives additional information that is useful to investors
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
Payment x Rate x Time
Credit Balance - Balance Sheet - Permanent - owners equity

20. 6th step of Accounting Cycle
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Debit Balance - Income Statement - temporary - Expense
post journal to general ledger
prepar journal to general ledger

21. Current Ratio
debit balance - Balance sheet - permanent - asset
Current Assets/Current Liabilities
debit balance - balance sheet - permanent - asset
prepare Unadjusted trial balance

22. Accts on Statement of Retained Earnings
Retained earnings beg. balance - Net income - dividends.
Contra Asset - noncurrent asset
wages payable - utilities payable - interest payable - unearned revenue - note payable
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

23. Income Satement Expenses
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
prepar journal to general ledger
Credit Balance - Balance Sheet - Permanent - owners equity
(long-term) assets (building - land - equipment)

24. Utilities expense
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
record transactions in general journal
debit balance - income statement - temporary - expense
companies must reduce the value of land - if the value is lower than its original cost.

25. 7th step of Accounting Cycle
prepare adjusted trial balance
prepare post-closing trial balance
prepare Unadjusted trial balance
prepare closing entry-post to general ledger

26. 1st step of Accounting Cycle
to those willing to take time to understand it
decrease equity - debit balance
debit balance - Balance sheet - permanent - asset
analyze transactions from external events

27. 9th step of Accounting Cycle
credit balance - income statement - temporary - Revenue
debit balance - balance sheet - permanent - asset
prepare closing entry-post to general ledger
prepare Unadjusted trial balance

28. Relevance
prepare adjusted trial balance
an appraised value for land gives additional information that is useful to investors
debit balance - income statement - temporary - expense
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

29. Retained Earnings
debit balance - balance sheet - permanent - asset
Credit balance - income statement - temporary - revenues
Debit Balance - Income Statement - Temporary - expense
Credit balance - Balance sheet and Retained Earnings - Permanent

30. Going Concern
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Identify Accounts affected
Debit Balance - Income Statement - Temporary - expense
Assets - Liabilities - Equity

31. Customer deposits
similar to unearned revenue- liabilities
Credit Balance - Balance Sheet - permanent - liability
Retained earnings beg. balance - Net income - dividends.
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

32. Multistep Income Statement
Credit balance - income statement - temporary - revenues
prepare financial statements
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income

33. Calculating Cost depreciation
determine the direction of the effect. debit or credit
prepare closing entry-post to general ledger
cost-salvage value/years of life
Revenues-Expenses

34. Calculating Interest Formula
Payment x Rate x Time
Assets - Liabilities - Equity
(long-term) assets (building - land - equipment)
record adjusting entries to general journal

35. Profit Margin %
longterm liabilities
debit balance - income statement - temporary - expense
Debit Balance - Balance sheet - permanent - asset
Net Income/Sales

36. Dividends
debit balance - Balance sheet - Permanent - asset
decrease equity - debit balance
to those willing to take time to understand it
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

37. Note Payable
Credit Balance - Balance Sheet - permanent - liability
debit balance - income statement - temporary - expense
Debit Balance - Balance sheet - permanent - asset
Assets - Liabilities - Equity

38. Understandability
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
to those willing to take time to understand it
debit balance - Balance sheet - permanent - asset
Debit Balance - Income Statement - temporary - Expense

39. Accumlated depreciation
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
prepare post-closing trial balance
Credit Balance - Balance Sheet - Permanent - owners equity
Contra Asset - noncurrent asset

40. 4th step of Accounting Cycle
Debit Balance - Income Statement - Temporary - expense
prepare Unadjusted trial balance
decrease equity - debit balance
prepare closing entry-post to general ledger

41. Goodwill
record adjusting entries to general journal
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
Retained earnings beg. balance - Net income - dividends.

42. Dividends
debit balance - balance sheet - permanent - asset
companies must reduce the value of land - if the value is lower than its original cost.
Debit Balance - Retained Earnings - Temporary - Owners Equity
credit balance - balance sheet - permanent - liabilities

43. Prepaid insurance
wages payable - utilities payable - interest payable - unearned revenue - note payable
debit balance - balance sheet - permanent - asset
prepare adjusted trial balance
longterm liabilities

44. 1st Step of Analying Transactions
Debit Balance - Retained Earnings - Temporary - Owners Equity
Identify Accounts affected
record adjusting entries to general journal
does the equation remain in balance?

45. Building
debit balance - Balance sheet - Permanent - asset
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
post journal to general ledger
Debit Balance - Retained Earnings - Temporary - Owners Equity

46. NonCurrent Assets
prepare Unadjusted trial balance
a company uses the same method each year for calculating inventory
prepare closing entry-post to general ledger
(long-term) assets (building - land - equipment)

47. Accts on balance sheet
debit balance - balance sheet - permanent - asset
Assets - Liabilities - Equity
wages payable - utilities payable - interest payable - unearned revenue - note payable
debit balance - balance sheet - permanent - asset

48. Sales revenue
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Current Assets/Current Liabilities
credit balance - income statement - temporary - Revenue
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

49. Interest Expense
(long-term) assets (building - land - equipment)
Close out all revenue and expense accounts into retained earnings.
Debit Balance - Income Statement - temporary - Expense
determine the direction of the effect. debit or credit

50. Balance Sheet Assets
Close out all revenue and expense accounts into retained earnings.
debit balance - income statement - temporary - expense
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Credit Balance - Balance Sheet - permanent - liability

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Business Accounting Basics

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