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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. Prepaid insurance
cost-salvage value/years of life
post journal to general ledger
debit balance - balance sheet - permanent - asset
Net Income/Sales

2. Balance Sheet Liabilities
to those willing to take time to understand it
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
wages payable - utilities payable - interest payable - unearned revenue - note payable
Close out all revenue and expense accounts into retained earnings.

3. Interest Revenue
Credit balance - income statement - temporary - revenues
an appraised value for land gives additional information that is useful to investors
debit balance - Balance sheet - permanent - asset
Debit Balance - Balance sheet - permanent - asset

4. 7th step of Accounting Cycle
Payment x Rate x Time
prepare adjusted trial balance
Debit Balance - Balance sheet - permanent - asset
Identify Accounts affected

5. NonCurrent Liabilities
to those willing to take time to understand it
record transactions in general journal
prepare adjusted trial balance
longterm liabilities

6. Cost of Goods Sold
credit balance - balance sheet - permanent - liabilities
Contra Asset - noncurrent asset
copyright - long term assets - noncurrent
Debit Balance - Income Statement - Temporary - expense

7. Balance Sheet Assets
prepare Unadjusted trial balance
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Identify Accounts affected
a company uses the same method each year for calculating inventory

8. Customer deposits
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Sales Revenues
determine the direction of the effect. debit or credit
similar to unearned revenue- liabilities

9. 2nd step of analyzing transactions
Debit Balance - Income Statement - temporary - Expense
copyright - long term assets - noncurrent
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
prepare closing entry-post to general ledger

10. Retained Earnings
Retained earnings beg. balance - Net income - dividends.
Credit balance - Balance sheet and Retained Earnings - Permanent
debit balance - Balance sheet - permanent - asset
Payment x Rate x Time

11. Understandability
prepare financial statements
Debit Balance - Income Statement - temporary - Expense
to those willing to take time to understand it
prepare Unadjusted trial balance

12. Goodwill
does the equation remain in balance?
debit balance - balance sheet - permanent - asset
Credit balance - income statement - temporary - revenues
Revenues-Expenses

13. Sales revenue
Credit balance - Balance sheet and Retained Earnings - Permanent
credit balance - income statement - temporary - Revenue
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.

14. 5th step of Accounting Cycle
Debit Balance - Retained Earnings - Temporary - Owners Equity
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
record transactions in general journal
record adjusting entries to general journal

15. Accounting Equation
debit balance - balance sheet - permanent - asset
Credit balance - income statement - temporary - revenues
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
prepare financial statements

16. 4th step of Accounting Cycle
prepare Unadjusted trial balance
decrease equity - debit balance
similar to unearned revenue- liabilities
does the equation remain in balance?

17. Accounts on Income Statement
an appraised value for land gives additional information that is useful to investors
copyright - long term assets - noncurrent
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Revenues and Expenses

18. Multistep Income Statement
prepare financial statements
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
cost-salvage value/years of life

19. Interest Expense
wages payable - utilities payable - interest payable - unearned revenue - note payable
Identify Accounts affected
Debit Balance - Income Statement - temporary - Expense
debit balance - Balance sheet - permanent - asset

20. Calculating Cost depreciation
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
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

21. Accounts Recievable
to those willing to take time to understand it
copyright - long term assets - noncurrent
Debit Balance - Balance sheet - permanent - asset
determine the direction of the effect. debit or credit

22. Building
prepar journal to general ledger
debit balance - Balance sheet - Permanent - asset
prepare closing entry-post to general ledger
debit balance - income statement - temporary - expense

23. Dividends
Current Assets/Current Liabilities
record transactions in general journal
decrease equity - debit balance
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

24. 9th step of Accounting Cycle
prepare closing entry-post to general ledger
Debit Balance - Retained Earnings - Temporary - Owners Equity
analyze transactions from external events
Credit balance - income statement - temporary - revenues

25. 1st Step of Analying Transactions
Current Assets/Current Liabilities
determine the direction of the effect. debit or credit
Assets - Liabilities - Equity
Identify Accounts affected

26. Balance sheet Equity
prepare adjusted trial balance
Contributed Capital - Retained Earnings - Dividends
determine the direction of the effect. debit or credit
copyright - long term assets - noncurrent

27. 4th step of analyzing transactions
Identify Accounts affected
(cash - accts revievable - inventory) turn into cash within 12 months
a company uses the same method each year for calculating inventory
does the equation remain in balance?

28. Cash Principle
determine the direction of the effect. debit or credit
Debit Balance - Retained Earnings - Temporary - Owners Equity
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

29. Conservatism
Current Assets/Current Liabilities
record transactions in general journal
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
companies must reduce the value of land - if the value is lower than its original cost.

30. 8th step of Accounting Cycle
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
how we measure - assumes economic mean
companies must reduce the value of land - if the value is lower than its original cost.
prepare financial statements

31. Utilities expense
record transactions in general journal
Credit balance - income statement - temporary - revenues
credit balance - balance sheet - permanent - liabilities
debit balance - income statement - temporary - expense

32. Calculating Interest Formula
debit balance - balance sheet - permanent - asset
Payment x Rate x Time
Credit balance - Balance sheet and Retained Earnings - Permanent
credit balance - balance sheet - permanent - liabilities

33. Inventory
does the equation remain in balance?
record adjusting entries to general journal
credit balance - income statement - temporary - Revenue
debit balance - Balance sheet - permanent - asset

34. Intangibles
Close out all revenue and expense accounts into retained earnings.
copyright - long term assets - noncurrent
prepare adjusted trial balance
Debit Balance - Balance sheet - permanent - asset

35. 10th step of Accounting Cycle
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Assets - Liabilities - Equity
prepare post-closing trial balance
post journal to general ledger

36. Accumulated depriciation
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
credit balance - balance sheet - permanent - liabilities
Sales Revenues
Credit Balance - Balance Sheet - Permanent - owners equity

37. 6th step of Accounting Cycle
Debit Balance - Retained Earnings - Temporary - Owners Equity
Retained earnings beg. balance - Net income - dividends.
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
post journal to general ledger

38. Common Stock
debit balance - income statement - temporary - expense
Credit Balance - Balance Sheet - Permanent - owners equity
Credit Balance - Balance Sheet - permanent - liability
how we measure - assumes economic mean

39. Income Satement Expenses
Credit Balance - Balance Sheet - Permanent - owners equity
Contributed Capital - Retained Earnings - Dividends
(long-term) assets (building - land - equipment)
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

40. Materiality

41. Note Payable
each owner has its own books - records - financial statements that are seperate.
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
record adjusting entries to general journal
Credit Balance - Balance Sheet - permanent - liability

42. Unearned revenue
Credit Balance - Balance Sheet - Permanent - owners equity
Debit Balance - Balance sheet - permanent - asset
credit balance - balance sheet - permanent - liabilities
prepare financial statements

43. 1st step of Accounting Cycle
credit balance - income statement - temporary - Revenue
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
analyze transactions from external events
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

44. Accts on balance sheet
Credit Balance - Balance Sheet - permanent - liability
Debit Balance - Income Statement - temporary - Expense
Assets - Liabilities - Equity
Credit Balance - Balance Sheet - Permanent - owners equity

45. Monetary Unit
how we measure - assumes economic mean
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
to those willing to take time to understand it
Assets - Liabilities - Equity

46. Current Assets
(cash - accts revievable - inventory) turn into cash within 12 months
debit balance - income statement - temporary - expense
Debit Balance - Retained Earnings - Temporary - Owners Equity
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

47. Accts on Statement of Retained Earnings
Revenues-Expenses
to those willing to take time to understand it
Retained earnings beg. balance - Net income - dividends.
debit balance - balance sheet - permanent - asset

48. Profit Margin %
Net Income/Sales
Payment x Rate x Time
Credit Balance - Balance Sheet - Permanent - owners equity
determine the direction of the effect. debit or credit

49. 3rd step of Accounting Cycle
the original amount to purchase land is verifiable through the contract documents
prepare adjusted trial balance
Close out all revenue and expense accounts into retained earnings.
prepar journal to general ledger

50. Calculating Net Income
Sales Revenues
Revenues-Expenses
Identify Accounts affected
how we measure - assumes economic mean