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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 Analying Transactions
Credit Balance - Balance Sheet - Permanent - owners equity
Identify Accounts affected
the original amount to purchase land is verifiable through the contract documents
decrease equity - debit balance

2. 4th step of analyzing transactions
each owner has its own books - records - financial statements that are seperate.
Debit Balance - Retained Earnings - Temporary - Owners Equity
credit balance - balance sheet - permanent - liabilities
does the equation remain in balance?

3. Accounts Recievable
Debit Balance - Balance sheet - permanent - asset
prepar journal to general ledger
credit balance - income statement - temporary - Revenue
longterm liabilities

4. Materiality
debit balance - Balance sheet - permanent - asset
prepare closing entry-post to general ledger
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
Credit balance - Balance sheet and Retained Earnings - Permanent

5. Interest Expense
debit balance - Balance sheet - Permanent - asset
Debit Balance - Retained Earnings - Temporary - Owners Equity
Debit Balance - Income Statement - temporary - Expense
cost-salvage value/years of life

6. 6th step of Accounting Cycle
prepare financial statements
post journal to general ledger
credit balance - income statement - temporary - Revenue
wages payable - utilities payable - interest payable - unearned revenue - note payable

7. Utilities expense
Contra Asset - noncurrent asset
to those willing to take time to understand it
debit balance - income statement - temporary - expense
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

8. Accts on balance sheet
Assets - Liabilities - Equity
record transactions in general journal
Credit Balance - Balance Sheet - permanent - liability
Debit Balance - Balance sheet - permanent - asset

9. Calculating Cost depreciation
debit balance - Balance sheet - Permanent - asset
cost-salvage value/years of life
Assets - Liabilities - Equity
Sales Revenues

10. Inventory
Revenues-Expenses
(cash - accts revievable - inventory) turn into cash within 12 months
debit balance - income statement - temporary - expense
debit balance - Balance sheet - permanent - asset

11. Dividends
each owner has its own books - records - financial statements that are seperate.
to those willing to take time to understand it
Debit Balance - Retained Earnings - Temporary - Owners Equity
Contributed Capital - Retained Earnings - Dividends

12. Customer deposits
prepare closing entry-post to general ledger
decrease equity - debit balance
prepare financial statements
similar to unearned revenue- liabilities

13. Prepaid insurance
debit balance - balance sheet - permanent - asset
prepare closing entry-post to general ledger
prepare adjusted trial balance
Credit Balance - Balance Sheet - Permanent - owners equity

14. 9th step of Accounting Cycle
prepare closing entry-post to general ledger
Credit balance - Balance sheet and Retained Earnings - Permanent
similar to unearned revenue- liabilities
(long-term) assets (building - land - equipment)

15. Multistep Income Statement
analyze transactions from external events
to those willing to take time to understand it
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
Debit Balance - Income Statement - Temporary - expense

16. 2nd step of Accounting Cycle
Identify Accounts affected
record transactions in general journal
the original amount to purchase land is verifiable through the contract documents
longterm liabilities

17. 1st step of Accounting Cycle
each owner has its own books - records - financial statements that are seperate.
Revenues-Expenses
analyze transactions from external events
record transactions in general journal

18. Understandability
credit balance - income statement - temporary - Revenue
to those willing to take time to understand it
companies must reduce the value of land - if the value is lower than its original cost.
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

19. Consistency
a company uses the same method each year for calculating inventory
debit balance - income statement - temporary - expense
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

20. NonCurrent Assets
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Credit Balance - Balance Sheet - Permanent - owners equity
each owner has its own books - records - financial statements that are seperate.
(long-term) assets (building - land - equipment)

21. Balance sheet Equity
Net Income/Sales
Retained earnings beg. balance - Net income - dividends.
Contributed Capital - Retained Earnings - Dividends
Debit Balance - Retained Earnings - Temporary - Owners Equity

22. Conservatism
companies must reduce the value of land - if the value is lower than its original cost.
Revenues and 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.
Debit Balance - Retained Earnings - Temporary - Owners Equity

23. Income Satement Expenses
an appraised value for land gives additional information that is useful to investors
Debit Balance - Balance sheet - permanent - asset
determine the direction of the effect. debit or credit
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

24. Accounts on Income Statement
Contributed Capital - Retained Earnings - Dividends
Revenues and Expenses
copyright - long term assets - noncurrent
Contra Asset - noncurrent asset

25. Relevance
(cash - accts revievable - inventory) turn into cash within 12 months
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
debit balance - Balance sheet - Permanent - asset

26. 10th step of Accounting Cycle
similar to unearned revenue- liabilities
does the equation remain in balance?
prepare post-closing trial balance
to those willing to take time to understand it

27. Dividends
decrease equity - debit balance
Retained earnings beg. balance - Net income - dividends.
each owner has its own books - records - financial statements that are seperate.
how we measure - assumes economic mean

28. NonCurrent Liabilities
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
prepare financial statements
longterm liabilities

29. Building
Net Income/Sales
record transactions in general journal
Current Assets/Current Liabilities
debit balance - Balance sheet - Permanent - asset

30. Income Statement Revenues
(long-term) assets (building - land - equipment)
record adjusting entries to general journal
Retained earnings beg. balance - Net income - dividends.
Sales Revenues

31. Closing Entries
post journal to general ledger
cost-salvage value/years of life
each owner has its own books - records - financial statements that are seperate.
Close out all revenue and expense accounts into retained earnings.

32. 4th step of Accounting Cycle
debit balance - income statement - temporary - expense
debit balance - Balance sheet - Permanent - asset
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
prepare Unadjusted trial balance

33. Common Stock
to those willing to take time to understand it
Credit Balance - Balance Sheet - Permanent - owners equity
decrease equity - debit balance
Contributed Capital - Retained Earnings - Dividends

34. Cash Principle
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Current Assets/Current Liabilities
Credit Balance - Balance Sheet - Permanent - owners equity
Debit Balance - Income Statement - temporary - Expense

35. Retained Earnings
Credit balance - Balance sheet and Retained Earnings - Permanent
decrease equity - debit balance
Credit balance - income statement - temporary - revenues
wages payable - utilities payable - interest payable - unearned revenue - note payable

36. Interest Revenue
how we measure - assumes economic mean
Identify Accounts affected
Credit balance - Balance sheet and Retained Earnings - Permanent
Credit balance - income statement - temporary - revenues

37. Balance Sheet Assets
Debit Balance - Balance sheet - permanent - asset
prepare adjusted trial balance
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
(long-term) assets (building - land - equipment)

38. Balance Sheet Liabilities
debit balance - balance sheet - permanent - asset
wages payable - utilities payable - interest payable - unearned revenue - note payable
companies must reduce the value of land - if the value is lower than its original cost.
debit balance - Balance sheet - Permanent - asset

39. 7th step of Accounting Cycle
prepare adjusted trial balance
Credit Balance - Balance Sheet - Permanent - owners equity
Credit balance - income statement - temporary - revenues
decrease equity - debit balance

40. Accts on Statement of Retained Earnings
Retained earnings beg. balance - Net income - dividends.
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.
record transactions in general journal

41. 2nd step of analyzing transactions
(long-term) assets (building - land - equipment)
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
credit balance - balance sheet - permanent - liabilities
Credit balance - Balance sheet and Retained Earnings - Permanent

42. Going Concern
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
longterm liabilities
similar to unearned revenue- liabilities
Net Income/Sales

43. Reliability
an appraised value for land gives additional information that is useful to investors
to those willing to take time to understand it
the original amount to purchase land is verifiable through the contract documents
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

44. Accumlated depreciation
to those willing to take time to understand it
Contra Asset - noncurrent asset
Debit Balance - Balance sheet - permanent - asset
an appraised value for land gives additional information that is useful to investors

45. Sales revenue
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
Identify Accounts affected

46. Note Payable
Debit Balance - Retained Earnings - Temporary - Owners Equity
longterm liabilities
Credit Balance - Balance Sheet - permanent - liability
prepare Unadjusted trial balance

47. Accounting Equation
a company uses the same method each year for calculating inventory
Revenues and Expenses
an appraised value for land gives additional information that is useful to investors
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

48. 8th step of Accounting Cycle
the original amount to purchase land is verifiable through the contract documents
prepare financial statements
analyze transactions from external events
Credit Balance - Balance Sheet - Permanent - owners equity

49. Current Ratio
Current Assets/Current Liabilities
each owner has its own books - records - financial statements that are seperate.
decrease equity - debit balance
Retained earnings beg. balance - Net income - dividends.

50. 3rd step of Accounting Cycle
prepare closing entry-post to general ledger
how we measure - assumes economic mean
Credit balance - income statement - temporary - revenues
prepar journal to general ledger

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Business Accounting Basics

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