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. 1st step of Accounting Cycle
analyze transactions from external events
debit balance - Balance sheet - Permanent - asset
credit balance - balance sheet - permanent - liabilities
credit balance - income statement - temporary - Revenue

2. Dividends
decrease equity - debit balance
Close out all revenue and expense accounts into retained earnings.
determine the direction of the effect. debit or credit
Contra Asset - noncurrent asset

3. Unearned revenue
prepare post-closing trial balance
credit balance - balance sheet - permanent - liabilities
to those willing to take time to understand it
debit balance - Balance sheet - permanent - asset

4. Goodwill
post journal to general ledger
debit balance - balance sheet - permanent - asset
analyze transactions from external events
prepare financial statements

5. 2nd step of Accounting Cycle
post journal to general ledger
record transactions in general journal
copyright - long term assets - noncurrent
Debit Balance - Retained Earnings - Temporary - Owners Equity

6. 9th step of Accounting Cycle
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
longterm liabilities
Credit Balance - Balance Sheet - Permanent - owners equity
prepare closing entry-post to general ledger

7. Inventory
(cash - accts revievable - inventory) turn into cash within 12 months
debit balance - Balance sheet - permanent - asset
to those willing to take time to understand it
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

8. Building
cost-salvage value/years of life
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Credit Balance - Balance Sheet - Permanent - owners equity
debit balance - Balance sheet - Permanent - asset

9. Understandability
each owner has its own books - records - financial statements that are seperate.
a company uses the same method each year for calculating inventory
to those willing to take time to understand it
Revenues and Expenses

10. Common Stock
copyright - long term assets - noncurrent
companies must reduce the value of land - if the value is lower than its original cost.
Credit Balance - Balance Sheet - Permanent - owners equity
Contributed Capital - Retained Earnings - Dividends

11. Going Concern
Contra Asset - noncurrent asset
Credit balance - Balance sheet and Retained Earnings - Permanent
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
does the equation remain in balance?

12. Interest Revenue
Credit balance - income statement - temporary - revenues
analyze transactions from external events
Contributed Capital - Retained Earnings - 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.

13. NonCurrent Liabilities
does the equation remain in balance?
Credit balance - Balance sheet and Retained Earnings - Permanent
analyze transactions from external events
longterm liabilities

14. 5th step of Accounting Cycle
Debit Balance - Balance sheet - permanent - asset
record adjusting entries to general journal
Payment x Rate x Time
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

15. Accounts Recievable
cost-salvage value/years of life
(long-term) assets (building - land - equipment)
Debit Balance - Retained Earnings - Temporary - Owners Equity
Debit Balance - Balance sheet - permanent - asset

16. Balance Sheet Liabilities
wages payable - utilities payable - interest payable - unearned revenue - note payable
debit balance - income statement - temporary - expense
Credit Balance - Balance Sheet - Permanent - owners equity
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

17. Dividends
Debit Balance - Retained Earnings - Temporary - Owners Equity
similar to unearned revenue- liabilities
Assets - Liabilities - Equity
debit balance - income statement - temporary - expense

18. 1st Step of Analying Transactions
Debit Balance - Retained Earnings - Temporary - Owners Equity
analyze transactions from external events
Identify Accounts affected
credit balance - balance sheet - permanent - liabilities

19. Accts on balance sheet
credit balance - balance sheet - permanent - liabilities
Assets - Liabilities - Equity
Payment x Rate x Time
(cash - accts revievable - inventory) turn into cash within 12 months

20. 6th step of Accounting Cycle
prepare post-closing trial balance
Revenues-Expenses
post journal to general ledger
Assets - Liabilities - Equity

21. Income Satement Expenses
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Credit balance - income statement - temporary - revenues
Revenues-Expenses
longterm liabilities

22. Sales revenue
debit balance - balance sheet - permanent - asset
prepare adjusted trial balance
credit balance - income statement - temporary - Revenue
longterm liabilities

23. Prepaid insurance
debit balance - balance sheet - permanent - asset
how we measure - assumes economic mean
cost-salvage value/years of life
Credit balance - income statement - temporary - revenues

24. NonCurrent Assets
Debit Balance - Retained Earnings - Temporary - Owners Equity
Contra Asset - noncurrent asset
Revenues-Expenses
(long-term) assets (building - land - equipment)

25. Balance sheet Equity
Debit Balance - Balance sheet - permanent - asset
record transactions in general journal
post journal to general ledger
Contributed Capital - Retained Earnings - Dividends

26. Consistency
debit balance - Balance sheet - Permanent - asset
a company uses the same method each year for calculating inventory
cost-salvage value/years of life
Sales Revenues

27. 3rd step of Accounting Cycle
cost-salvage value/years of life
Debit Balance - Income Statement - temporary - Expense
each owner has its own books - records - financial statements that are seperate.
prepar journal to general ledger

28. Note Payable
prepare post-closing trial balance
Current Assets/Current Liabilities
Credit balance - Balance sheet and Retained Earnings - Permanent
Credit Balance - Balance Sheet - permanent - liability

29. Multistep Income Statement
(long-term) assets (building - land - equipment)
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-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
credit balance - income statement - temporary - Revenue

30. Reliability
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Debit Balance - Balance sheet - permanent - asset
the original amount to purchase land is verifiable through the contract documents
to those willing to take time to understand it

31. Intangibles
copyright - long term assets - noncurrent
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
prepar journal to general ledger
debit balance - income statement - temporary - expense

32. Closing Entries
debit balance - Balance sheet - Permanent - asset
analyze transactions from external events
Close out all revenue and expense accounts into retained earnings.
Current Assets/Current Liabilities

33. Utilities expense
debit balance - income statement - temporary - expense
Credit Balance - Balance Sheet - Permanent - owners equity
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
how we measure - assumes economic mean

34. Customer deposits
Revenues and Expenses
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
similar to unearned revenue- liabilities
prepare Unadjusted trial balance

35. Current Ratio
debit balance - Balance sheet - Permanent - asset
a company uses the same method each year for calculating inventory
(cash - accts revievable - inventory) turn into cash within 12 months
Current Assets/Current Liabilities

36. Materiality
record transactions in general journal
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.
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

37. Calculating Interest Formula
record adjusting entries to general journal
Debit Balance - Income Statement - Temporary - expense
the original amount to purchase land is verifiable through the contract documents
Payment x Rate x Time

38. Income Statement Revenues
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Payment x Rate x Time
Sales Revenues

39. 8th step of Accounting Cycle
determine the direction of the effect. debit or credit
prepare financial statements
Net Income/Sales
does the equation remain in balance?

40. Calculating Cost depreciation
Credit Balance - Balance Sheet - permanent - liability
cost-salvage value/years of life
credit balance - balance sheet - permanent - liabilities
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

41. Relevance
an appraised value for land gives additional information that is useful to investors
does the equation remain in balance?
debit balance - income statement - temporary - expense
prepare post-closing trial balance

42. Accts on Statement of Retained Earnings
(long-term) assets (building - land - equipment)
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Close out all revenue and expense accounts into retained earnings.
Retained earnings beg. balance - Net income - dividends.

43. Economic Equity
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Revenues and Expenses
Current Assets/Current Liabilities
each owner has its own books - records - financial statements that are seperate.

44. Accumlated depreciation
Contra Asset - noncurrent asset
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
Debit Balance - Balance sheet - permanent - asset
Net Income/Sales

45. Balance Sheet Assets
Debit Balance - Balance sheet - permanent - asset
Close out all revenue and expense accounts into retained earnings.
an appraised value for land gives additional information that is useful to investors
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

46. Calculating Net Income
prepare post-closing trial balance
prepar journal to general ledger
Close out all revenue and expense accounts into retained earnings.
Revenues-Expenses

47. Accounting Equation
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
copyright - long term assets - noncurrent
cost-salvage value/years of life
Assets - Liabilities - Equity

48. Interest Expense
debit balance - Balance sheet - Permanent - asset
Sales Revenues
Debit Balance - Income Statement - temporary - Expense
Net Income/Sales

49. Cost of Goods Sold
Debit Balance - Income Statement - Temporary - expense
debit balance - Balance sheet - permanent - asset
debit balance - balance sheet - permanent - asset
does the equation remain in balance?

50. Current Assets
Credit Balance - Balance Sheet - Permanent - owners equity
(cash - accts revievable - inventory) turn into cash within 12 months
post journal to general ledger
debit balance - balance sheet - permanent - asset

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Business Accounting Basics

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