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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. Accumulated depriciation
does the equation remain in balance?
Assets - Liabilities - Equity
credit balance - balance sheet - permanent - liabilities
each owner has its own books - records - financial statements that are seperate.

2. Relevance
Credit balance - income statement - temporary - revenues
Identify Accounts affected
an appraised value for land gives additional information that is useful to investors
Debit Balance - Income Statement - Temporary - expense

3. Accounting Equation
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
prepare financial statements
how we measure - assumes economic mean
Sales Revenues

4. Reliability
Debit Balance - Retained Earnings - Temporary - Owners Equity
analyze transactions from external events
the original amount to purchase land is verifiable through the contract documents
debit balance - Balance sheet - permanent - asset

5. 1st Step of Analying Transactions
Debit Balance - Income Statement - temporary - Expense
record adjusting entries to general journal
Identify Accounts affected
(long-term) assets (building - land - equipment)

6. Interest Revenue
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
debit balance - balance sheet - permanent - asset
Credit balance - income statement - temporary - revenues
(long-term) assets (building - land - equipment)

7. Accts on Statement of Retained Earnings
prepare financial statements
Debit Balance - Balance sheet - permanent - asset
Retained earnings beg. balance - Net income - dividends.
longterm liabilities

8. Going Concern
prepare post-closing trial balance
cost-salvage value/years of life
debit balance - income statement - temporary - expense
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

9. Materiality

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10. Income Statement Revenues
wages payable - utilities payable - interest payable - unearned revenue - note payable
copyright - long term assets - noncurrent
Sales Revenues
companies must reduce the value of land - if the value is lower than its original cost.

11. 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
record transactions in general journal
decrease equity - debit balance
Debit Balance - Income Statement - Temporary - expense

12. Calculating Cost depreciation
a company uses the same method each year for calculating inventory
the original amount to purchase land is verifiable through the contract documents
cost-salvage value/years of life
debit balance - balance sheet - permanent - asset

13. Retained Earnings
longterm liabilities
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Credit balance - Balance sheet and Retained Earnings - Permanent
each owner has its own books - records - financial statements that are seperate.

14. Balance Sheet Assets
companies must reduce the value of land - if the value is lower than its original cost.
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Credit Balance - Balance Sheet - Permanent - owners equity

15. 1st step of Accounting Cycle
Sales Revenues
Debit Balance - Income Statement - temporary - Expense
how we measure - assumes economic mean
analyze transactions from external events

16. Calculating Net Income
Net Income/Sales
Revenues-Expenses
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

17. 9th step of Accounting Cycle
how we measure - assumes economic mean
prepare post-closing trial balance
(cash - accts revievable - inventory) turn into cash within 12 months
prepare closing entry-post to general ledger

18. 4th step of analyzing transactions
Net Income/Sales
Sales Revenues
Debit Balance - Retained Earnings - Temporary - Owners Equity
does the equation remain in balance?

19. Income Satement Expenses
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
debit balance - income statement - temporary - expense
(cash - accts revievable - inventory) turn into cash within 12 months
debit balance - Balance sheet - permanent - asset

20. NonCurrent Assets
(long-term) assets (building - land - equipment)
a company uses the same method each year for calculating inventory
does the equation remain in balance?
Contra Asset - noncurrent asset

21. Common Stock
Debit Balance - Balance sheet - permanent - asset
record adjusting entries to general journal
each owner has its own books - records - financial statements that are seperate.
Credit Balance - Balance Sheet - Permanent - owners equity

22. Cost of Goods Sold
Net Income/Sales
credit balance - balance sheet - permanent - liabilities
Debit Balance - Income Statement - Temporary - expense
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

23. Conservatism
credit balance - balance sheet - permanent - liabilities
Retained earnings beg. balance - Net income - dividends.
companies must reduce the value of land - if the value is lower than its original cost.
Identify Accounts affected

24. Goodwill
Current Assets/Current Liabilities
prepare adjusted trial balance
debit balance - income statement - temporary - expense
debit balance - balance sheet - permanent - asset

25. 5th step of Accounting Cycle
analyze transactions from external events
record adjusting entries to general journal
record transactions in general journal
(cash - accts revievable - inventory) turn into cash within 12 months

26. 4th step of Accounting Cycle
prepare Unadjusted trial balance
debit balance - balance sheet - permanent - asset
Credit balance - income statement - temporary - revenues
prepare adjusted trial balance

27. Closing Entries
Close out all revenue and expense accounts into retained earnings.
longterm liabilities
Revenues and Expenses
Revenues-Expenses

28. 2nd step of Accounting Cycle
Revenues and Expenses
Payment x Rate x Time
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
record transactions in general journal

29. Monetary Unit
decrease equity - debit balance
post journal to general ledger
Credit balance - income statement - temporary - revenues
how we measure - assumes economic mean

30. Accts on balance sheet
record adjusting entries to general journal
Assets - Liabilities - Equity
Revenues and Expenses
cost-salvage value/years of life

31. Prepaid insurance
debit balance - balance sheet - permanent - asset
record adjusting entries to general journal
record transactions in general journal
a company uses the same method each year for calculating inventory

32. Utilities expense
debit balance - income statement - temporary - expense
post journal to general ledger
prepar journal to general ledger
Identify Accounts affected

33. 8th step of Accounting Cycle
Payment x Rate x Time
(cash - accts revievable - inventory) turn into cash within 12 months
record adjusting entries to general journal
prepare financial statements

34. Balance sheet Equity
credit balance - balance sheet - permanent - liabilities
Current Assets/Current Liabilities
wages payable - utilities payable - interest payable - unearned revenue - note payable
Contributed Capital - Retained Earnings - Dividends

35. Intangibles
Contra Asset - noncurrent asset
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Contributed Capital - Retained Earnings - Dividends
copyright - long term assets - noncurrent

36. Note Payable
wages payable - utilities payable - interest payable - unearned revenue - note payable
Credit Balance - Balance Sheet - permanent - liability
Assets - Liabilities - Equity
(cash - accts revievable - inventory) turn into cash within 12 months

37. Sales revenue
Contra Asset - noncurrent asset
prepar journal to general ledger
credit balance - income statement - temporary - Revenue
debit balance - Balance sheet - permanent - asset

38. Accounts Recievable
Debit Balance - Balance sheet - permanent - asset
Current Assets/Current Liabilities
each owner has its own books - records - financial statements that are seperate.
credit balance - balance sheet - permanent - liabilities

39. 3rd step of Accounting Cycle
does the equation remain in balance?
Revenues-Expenses
prepar journal to general ledger
credit balance - income statement - temporary - Revenue

40. Dividends
cost-salvage value/years of life
prepar journal to general ledger
copyright - long term assets - noncurrent
Debit Balance - Retained Earnings - Temporary - Owners Equity

41. Dividends
Debit Balance - Balance sheet - permanent - asset
record transactions in general journal
companies must reduce the value of land - if the value is lower than its original cost.
decrease equity - debit balance

42. Interest Expense
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
Debit Balance - Income Statement - temporary - Expense
record transactions in general journal

43. Balance Sheet Liabilities
Net Income/Sales
companies must reduce the value of land - if the value is lower than its original cost.
(cash - accts revievable - inventory) turn into cash within 12 months
wages payable - utilities payable - interest payable - unearned revenue - note payable

44. 3rd step of analyzing transactions
record adjusting entries to general journal
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
record transactions in general journal

45. NonCurrent Liabilities
Assets - Liabilities - Equity
cost-salvage value/years of life
longterm liabilities
prepare financial statements

46. Cash Principle
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
debit balance - income statement - temporary - expense
Debit Balance - Income Statement - Temporary - expense

47. Current Assets
Retained earnings beg. balance - Net income - dividends.
(cash - accts revievable - inventory) turn into cash within 12 months
Revenues-Expenses
analyze transactions from external events

48. Understandability
Close out all revenue and expense accounts into retained earnings.
Credit balance - income statement - temporary - revenues
to those willing to take time to understand it
Retained earnings beg. balance - Net income - dividends.

49. Accumlated depreciation
Contra Asset - noncurrent asset
does the equation remain in balance?
the original amount to purchase land is verifiable through the contract documents
prepare adjusted trial balance

50. Current Ratio
a company uses the same method each year for calculating inventory
Current Assets/Current Liabilities
Credit balance - income statement - temporary - revenues
Debit Balance - Income Statement - temporary - Expense