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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. 5th step of Accounting Cycle
(cash - accts revievable - inventory) turn into cash within 12 months
record adjusting entries to general journal
wages payable - utilities payable - interest payable - unearned revenue - note payable
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

2. 2nd step of analyzing transactions
debit balance - income statement - temporary - expense
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
a company uses the same method each year for calculating inventory

3. NonCurrent Assets
Debit Balance - Income Statement - Temporary - expense
prepar journal to general ledger
(long-term) assets (building - land - equipment)
Credit balance - income statement - temporary - revenues

4. Cost of Goods Sold
Debit Balance - Income Statement - Temporary - expense
Credit balance - income statement - temporary - revenues
prepare Unadjusted trial balance
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

5. 1st step of Accounting Cycle
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
analyze transactions from external events
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Net Income/Sales

6. 9th step of Accounting Cycle
prepar journal to general ledger
Assets - Liabilities - Equity
prepare closing entry-post to general ledger
cost-salvage value/years of life

7. Accumulated depriciation
prepare financial statements
longterm liabilities
credit balance - balance sheet - permanent - liabilities
debit balance - balance sheet - permanent - asset

8. Balance Sheet Assets
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
debit balance - Balance sheet - permanent - asset
(cash - accts revievable - inventory) turn into cash within 12 months
prepare adjusted trial balance

9. Sales revenue
prepare Unadjusted trial balance
Debit Balance - Balance sheet - permanent - asset
credit balance - income statement - temporary - Revenue
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

10. Profit Margin %
Payment x Rate x Time
Contributed Capital - Retained Earnings - Dividends
debit balance - balance sheet - permanent - asset
Net Income/Sales

11. Building
(cash - accts revievable - inventory) turn into cash within 12 months
debit balance - Balance sheet - Permanent - asset
longterm liabilities
Revenues and Expenses

12. Balance sheet Equity
Contributed Capital - Retained Earnings - Dividends
(cash - accts revievable - inventory) turn into cash within 12 months
Close out all revenue and expense accounts into retained earnings.
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

13. Monetary Unit
credit balance - balance sheet - permanent - liabilities
prepare adjusted trial balance
how we measure - assumes economic mean
prepare Unadjusted trial balance

14. Dividends
Debit Balance - Retained Earnings - Temporary - Owners Equity
Debit Balance - Income Statement - Temporary - expense
Debit Balance - Balance sheet - permanent - asset
Current Assets/Current Liabilities

15. Relevance
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
Retained earnings beg. balance - Net income - dividends.
does the equation remain in balance?

16. 2nd step of Accounting Cycle
debit balance - Balance sheet - Permanent - asset
Credit Balance - Balance Sheet - Permanent - owners equity
record transactions in general journal
cost-salvage value/years of life

17. 1st Step of Analying Transactions
Sales Revenues
Revenues-Expenses
debit balance - balance sheet - permanent - asset
Identify Accounts affected

18. Customer deposits
does the equation remain in balance?
debit balance - income statement - temporary - expense
similar to unearned revenue- liabilities
an appraised value for land gives additional information that is useful to investors

19. 10th step of Accounting Cycle
prepare post-closing trial balance
Revenues and Expenses
Retained earnings beg. balance - Net income - dividends.
prepare closing entry-post to general ledger

20. Utilities expense
credit balance - balance sheet - permanent - liabilities
cost-salvage value/years of life
debit balance - income statement - temporary - expense
each owner has its own books - records - financial statements that are seperate.

21. 3rd step of Accounting Cycle
longterm liabilities
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Contributed Capital - Retained Earnings - Dividends
prepar journal to general ledger

22. Retained Earnings
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
does the equation remain in balance?
(cash - accts revievable - inventory) turn into cash within 12 months
Credit balance - Balance sheet and Retained Earnings - Permanent

23. Accts on Statement of Retained Earnings
Net Income/Sales
record transactions in general journal
record adjusting entries to general journal
Retained earnings beg. balance - Net income - dividends.

24. Multistep Income Statement
Current Assets/Current Liabilities
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
(cash - accts revievable - inventory) turn into cash within 12 months
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income

25. Going Concern
Debit Balance - Income Statement - Temporary - expense
(long-term) assets (building - land - equipment)
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Identify Accounts affected

26. Economic Equity
each owner has its own books - records - financial statements that are seperate.
debit balance - balance sheet - permanent - asset
debit balance - Balance sheet - permanent - asset
credit balance - balance sheet - permanent - liabilities

27. NonCurrent Liabilities
cost-salvage value/years of life
longterm liabilities
credit balance - balance sheet - permanent - liabilities
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

28. Accumlated depreciation
Net Income/Sales
Contra Asset - noncurrent asset
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
(cash - accts revievable - inventory) turn into cash within 12 months

29. Calculating Cost depreciation
similar to unearned revenue- liabilities
cost-salvage value/years of life
prepare closing entry-post to general ledger
Close out all revenue and expense accounts into retained earnings.

30. Current Ratio
prepare financial statements
Sales Revenues
Current Assets/Current Liabilities
Identify Accounts affected

31. Closing Entries
Close out all revenue and expense accounts into retained earnings.
copyright - long term assets - noncurrent
companies must reduce the value of land - if the value is lower than its original cost.
prepare financial statements

32. Accounting Equation
similar to unearned revenue- liabilities
prepar journal to general ledger
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
an appraised value for land gives additional information that is useful to investors

33. Accounts Recievable
does the equation remain in balance?
Debit Balance - Balance sheet - permanent - asset
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
determine the direction of the effect. debit or credit

34. Cash Principle
Retained earnings beg. balance - Net income - dividends.
decrease equity - debit balance
(long-term) assets (building - land - equipment)
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

35. Intangibles
Close out all revenue and expense accounts into retained earnings.
copyright - long term assets - noncurrent
Payment x Rate x Time
Contributed Capital - Retained Earnings - Dividends

36. 3rd step of analyzing transactions
longterm liabilities
determine the direction of the effect. debit or credit
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
debit balance - Balance sheet - Permanent - asset

37. Calculating Interest Formula
record transactions in general journal
Contributed Capital - Retained Earnings - Dividends
cost-salvage value/years of life
Payment x Rate x Time

38. 4th step of analyzing transactions
Credit balance - Balance sheet and Retained Earnings - Permanent
similar to unearned revenue- liabilities
does the equation remain in balance?
Debit Balance - Retained Earnings - Temporary - Owners Equity

39. Note Payable
Credit Balance - Balance Sheet - permanent - liability
Revenues and Expenses
prepare financial statements
Net Income/Sales

40. Current Assets
(cash - accts revievable - inventory) turn into cash within 12 months
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
prepare post-closing trial balance
Contra Asset - noncurrent asset

41. Interest Expense
Identify Accounts affected
Debit Balance - Balance sheet - permanent - asset
Debit Balance - Income Statement - temporary - Expense
the original amount to purchase land is verifiable through the contract documents

42. Calculating Net Income
Contributed Capital - Retained Earnings - Dividends
prepare post-closing trial balance
Debit Balance - Retained Earnings - Temporary - Owners Equity
Revenues-Expenses

43. Accts on balance sheet
decrease equity - debit balance
(cash - accts revievable - inventory) turn into cash within 12 months
Payment x Rate x Time
Assets - Liabilities - Equity

44. Prepaid insurance
prepare Unadjusted trial balance
Close out all revenue and expense accounts into retained earnings.
record adjusting entries to general journal
debit balance - balance sheet - permanent - asset

45. Unearned revenue
credit balance - balance sheet - permanent - liabilities
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
cost-salvage value/years of life
Debit Balance - Income Statement - Temporary - expense

46. Income Satement Expenses
Retained earnings beg. balance - Net income - dividends.
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
debit balance - Balance sheet - Permanent - asset

47. Accounts on Income Statement
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
determine the direction of the effect. debit or credit
to those willing to take time to understand it
Revenues and Expenses

48. Reliability
the original amount to purchase land is verifiable through the contract documents
each owner has its own books - records - financial statements that are seperate.
Debit Balance - Income Statement - temporary - Expense
Retained earnings beg. balance - Net income - dividends.

49. Inventory
credit balance - balance sheet - permanent - liabilities
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
cost-salvage value/years of life
debit balance - Balance sheet - permanent - asset

50. Balance Sheet Liabilities
debit balance - income statement - temporary - expense
Close out all revenue and expense accounts into retained earnings.
prepare post-closing trial balance
wages payable - utilities payable - interest payable - unearned revenue - note payable