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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. Interest Revenue
Contributed Capital - Retained Earnings - Dividends
prepare closing entry-post to general ledger
Credit balance - income statement - temporary - revenues
Debit Balance - Income Statement - Temporary - expense

2. Closing Entries
Close out all revenue and expense accounts into retained earnings.
Credit Balance - Balance Sheet - Permanent - owners equity
Debit Balance - Balance sheet - permanent - asset
each owner has its own books - records - financial statements that are seperate.

3. Economic Equity
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Assets - Liabilities - Equity
prepare adjusted trial balance
each owner has its own books - records - financial statements that are seperate.

4. Going Concern
debit balance - income statement - temporary - expense
debit balance - balance sheet - permanent - asset
Close out all revenue and expense accounts into retained earnings.
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

5. Materiality

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6. Inventory
similar to unearned revenue- liabilities
debit balance - Balance sheet - permanent - asset
Debit Balance - Income Statement - Temporary - expense
Debit Balance - Retained Earnings - Temporary - Owners Equity

7. 6th step of Accounting Cycle
Credit Balance - Balance Sheet - Permanent - owners equity
prepare post-closing trial balance
each owner has its own books - records - financial statements that are seperate.
post journal to general ledger

8. 2nd step of analyzing transactions
each owner has its own books - records - financial statements that are seperate.
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
companies must reduce the value of land - if the value is lower than its original cost.
Debit Balance - Balance sheet - permanent - asset

9. 8th step of Accounting Cycle
Sales Revenues
Net Income/Sales
debit balance - Balance sheet - permanent - asset
prepare financial statements

10. Accumulated depriciation
Contributed Capital - Retained Earnings - Dividends
Debit Balance - Balance sheet - permanent - asset
credit balance - balance sheet - permanent - liabilities
Identify Accounts affected

11. Goodwill
Debit Balance - Income Statement - Temporary - expense
post journal to general ledger
Contributed Capital - Retained Earnings - Dividends
debit balance - balance sheet - permanent - asset

12. 2nd step of Accounting Cycle
Identify Accounts affected
Sales Revenues
Credit balance - Balance sheet and Retained Earnings - Permanent
record transactions in general journal

13. 5th step of Accounting Cycle
debit balance - Balance sheet - permanent - asset
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 adjusting entries to general journal

14. Multistep Income Statement
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
prepare adjusted trial balance
Revenues and Expenses

15. Customer deposits
credit balance - income statement - temporary - Revenue
to those willing to take time to understand it
Credit balance - income statement - temporary - revenues
similar to unearned revenue- liabilities

16. Building
debit balance - Balance sheet - Permanent - asset
Contra Asset - noncurrent asset
each owner has its own books - records - financial statements that are seperate.
prepare financial statements

17. Current Ratio
Credit Balance - Balance Sheet - permanent - liability
an appraised value for land gives additional information that is useful to investors
Current Assets/Current Liabilities
Debit Balance - Balance sheet - permanent - asset

18. Unearned revenue
credit balance - balance sheet - permanent - liabilities
Credit Balance - Balance Sheet - Permanent - owners equity
longterm liabilities
Revenues-Expenses

19. Accts on Statement of Retained Earnings
does the equation remain in balance?
Retained earnings beg. balance - Net income - dividends.
Debit Balance - Income Statement - Temporary - expense
companies must reduce the value of land - if the value is lower than its original cost.

20. Cost of Goods Sold
Current Assets/Current Liabilities
Credit balance - income statement - temporary - revenues
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Debit Balance - Income Statement - Temporary - expense

21. Monetary Unit
how we measure - assumes economic mean
a company uses the same method each year for calculating inventory
Contra Asset - noncurrent asset
debit balance - balance sheet - permanent - asset

22. Income Statement Revenues
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Credit balance - income statement - temporary - revenues
Sales Revenues
copyright - long term assets - noncurrent

23. Retained Earnings
debit balance - Balance sheet - Permanent - asset
prepar journal to general ledger
(long-term) assets (building - land - equipment)
Credit balance - Balance sheet and Retained Earnings - Permanent

24. 3rd step of analyzing transactions
Credit Balance - Balance Sheet - Permanent - owners equity
Close out all revenue and expense accounts into retained earnings.
the original amount to purchase land is verifiable through the contract documents
determine the direction of the effect. debit or credit

25. Common Stock
Credit Balance - Balance Sheet - Permanent - owners equity
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
credit balance - balance sheet - permanent - liabilities
Identify Accounts affected

26. Consistency
debit balance - balance sheet - permanent - asset
similar to unearned revenue- liabilities
(cash - accts revievable - inventory) turn into cash within 12 months
a company uses the same method each year for calculating inventory

27. Profit Margin %
debit balance - income statement - temporary - expense
prepare financial statements
(cash - accts revievable - inventory) turn into cash within 12 months
Net Income/Sales

28. Balance sheet Equity
Contributed Capital - Retained Earnings - Dividends
companies must reduce the value of land - if the value is lower than its original cost.
Credit balance - income statement - temporary - revenues
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

29. Calculating Net Income
wages payable - utilities payable - interest payable - unearned revenue - note payable
Revenues-Expenses
longterm liabilities
the original amount to purchase land is verifiable through the contract documents

30. 4th step of analyzing transactions
does the equation remain in balance?
Contra Asset - noncurrent asset
(long-term) assets (building - land - equipment)
Assets - Liabilities - Equity

31. Accounts on Income Statement
each owner has its own books - records - financial statements that are seperate.
prepar journal to general ledger
(cash - accts revievable - inventory) turn into cash within 12 months
Revenues and Expenses

32. Utilities expense
debit balance - income statement - temporary - expense
prepare closing entry-post to general ledger
credit balance - balance sheet - permanent - liabilities
an appraised value for land gives additional information that is useful to investors

33. 10th step of Accounting Cycle
Debit Balance - Retained Earnings - Temporary - Owners Equity
copyright - long term assets - noncurrent
prepare post-closing trial balance
decrease equity - debit balance

34. 1st step of Accounting Cycle
Debit Balance - Retained Earnings - Temporary - Owners Equity
the original amount to purchase land is verifiable through the contract documents
Identify Accounts affected
analyze transactions from external events

35. 3rd step of Accounting Cycle
credit balance - balance sheet - permanent - liabilities
determine the direction of the effect. debit or credit
Contra Asset - noncurrent asset
prepar journal to general ledger

36. Accounting Equation
Identify Accounts affected
credit balance - balance sheet - permanent - liabilities
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Close out all revenue and expense accounts into retained earnings.

37. Reliability
Debit Balance - Retained Earnings - Temporary - Owners Equity
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
prepare financial statements
the original amount to purchase land is verifiable through the contract documents

38. Relevance
Contributed Capital - Retained Earnings - Dividends
credit balance - income statement - temporary - Revenue
an appraised value for land gives additional information that is useful to investors
Contra Asset - noncurrent asset

39. Understandability
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
wages payable - utilities payable - interest payable - unearned revenue - note payable
to those willing to take time to understand it
analyze transactions from external events

40. Conservatism
Revenues-Expenses
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
companies must reduce the value of land - if the value is lower than its original cost.
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

41. Cash Principle
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
debit balance - Balance sheet - Permanent - asset
Net Income/Sales
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

42. Accounts Recievable
Debit Balance - Balance sheet - permanent - asset
Close out all revenue and expense accounts into retained earnings.
decrease equity - debit balance
wages payable - utilities payable - interest payable - unearned revenue - note payable

43. Income Satement Expenses
credit balance - balance sheet - permanent - liabilities
credit balance - income statement - temporary - Revenue
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Credit Balance - Balance Sheet - Permanent - owners equity

44. NonCurrent Assets
(long-term) assets (building - land - equipment)
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
wages payable - utilities payable - interest payable - unearned revenue - note payable

45. Accumlated depreciation
Contra Asset - noncurrent asset
the original amount to purchase land is verifiable through the contract documents
Debit Balance - Income Statement - Temporary - expense
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

46. 1st Step of Analying Transactions
Debit Balance - Retained Earnings - Temporary - Owners Equity
Identify Accounts affected
Debit Balance - Balance sheet - permanent - asset
record adjusting entries to general journal

47. Interest Expense
post journal to general ledger
Contributed Capital - Retained Earnings - Dividends
prepare closing entry-post to general ledger
Debit Balance - Income Statement - temporary - Expense

48. Dividends
similar to unearned revenue- liabilities
Debit Balance - Income Statement - temporary - Expense
copyright - long term assets - noncurrent
decrease equity - debit balance

49. Intangibles
prepare post-closing trial balance
does the equation remain in balance?
copyright - long term assets - noncurrent
Credit balance - Balance sheet and Retained Earnings - Permanent

50. Balance Sheet Liabilities
Credit balance - income statement - temporary - revenues
Close out all revenue and expense accounts into retained earnings.
the original amount to purchase land is verifiable through the contract documents
wages payable - utilities payable - interest payable - unearned revenue - note payable