Test your basic knowledge |

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. Utilities expense
debit balance - balance sheet - permanent - asset
a company uses the same method each year for calculating inventory
debit balance - income statement - temporary - expense
Close out all revenue and expense accounts into retained earnings.

2. 10th step of Accounting Cycle
prepare post-closing trial balance
Debit Balance - Income Statement - Temporary - expense
Identify Accounts affected
Debit Balance - Income Statement - temporary - Expense

3. Dividends
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Revenues and Expenses
determine the direction of the effect. debit or credit
decrease equity - debit balance

4. Customer deposits
record transactions in general journal
how we measure - assumes economic mean
similar to unearned revenue- liabilities
(cash - accts revievable - inventory) turn into cash within 12 months

5. 4th step of Accounting Cycle
prepare Unadjusted trial balance
a company uses the same method each year for calculating inventory
credit balance - income statement - temporary - Revenue
Identify Accounts affected

6. Materiality

7. Relevance
an appraised value for land gives additional information that is useful to investors
companies must reduce the value of land - if the value is lower than its original cost.
Identify Accounts affected
does the equation remain in balance?

8. Conservatism
Revenues and Expenses
Net Income/Sales
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.

9. Building
debit balance - Balance sheet - Permanent - asset
post journal to general ledger
a company uses the same method each year for calculating inventory
prepare Unadjusted trial balance

10. Balance Sheet Liabilities
Assets - Liabilities - Equity
Credit Balance - Balance Sheet - Permanent - owners equity
wages payable - utilities payable - interest payable - unearned revenue - note payable
credit balance - balance sheet - permanent - liabilities

11. 1st step of Accounting Cycle
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
analyze transactions from external events
Debit Balance - Retained Earnings - Temporary - Owners Equity
debit balance - balance sheet - permanent - asset

12. 4th step of analyzing transactions
Contra Asset - noncurrent asset
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-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.
does the equation remain in balance?

13. Accounts Recievable
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 - liability
credit balance - balance sheet - permanent - liabilities
Debit Balance - Balance sheet - permanent - asset

14. Retained Earnings
Credit balance - Balance sheet and Retained Earnings - Permanent
record adjusting entries to general journal
Revenues-Expenses
does the equation remain in balance?

15. NonCurrent Assets
(long-term) assets (building - land - equipment)
copyright - long term assets - noncurrent
credit balance - income statement - temporary - Revenue
Debit Balance - Income Statement - Temporary - expense

16. Closing Entries
an appraised value for land gives additional information that is useful to investors
Payment x Rate x Time
Close out all revenue and expense accounts into retained earnings.
prepare closing entry-post to general ledger

17. Intangibles
Debit Balance - Income Statement - Temporary - expense
credit balance - balance sheet - permanent - liabilities
Sales Revenues
copyright - long term assets - noncurrent

18. Accts on balance sheet
Assets - Liabilities - Equity
Debit Balance - Income Statement - Temporary - expense
record adjusting entries to general journal
decrease equity - debit balance

19. Current Assets
cost-salvage value/years of life
Net Income/Sales
Debit Balance - Income Statement - temporary - Expense
(cash - accts revievable - inventory) turn into cash within 12 months

20. 1st Step of Analying Transactions
debit balance - income statement - temporary - expense
Identify Accounts affected
Sales Revenues
to those willing to take time to understand it

21. Note Payable
similar to unearned revenue- liabilities
(long-term) assets (building - land - equipment)
Close out all revenue and expense accounts into retained earnings.
Credit Balance - Balance Sheet - permanent - liability

22. 3rd step of analyzing transactions
companies must reduce the value of land - if the value is lower than its original cost.
how we measure - assumes economic mean
determine the direction of the effect. debit or credit
does the equation remain in balance?

23. Balance sheet Equity
a company uses the same method each year for calculating inventory
the original amount to purchase land is verifiable through the contract documents
Debit Balance - Retained Earnings - Temporary - Owners Equity
Contributed Capital - Retained Earnings - Dividends

24. Accounts on Income Statement
companies must reduce the value of land - if the value is lower than its original cost.
a company uses the same method each year for calculating inventory
Revenues and Expenses
analyze transactions from external events

25. Balance Sheet Assets
an appraised value for land gives additional information that is useful to investors
debit balance - balance sheet - permanent - asset
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
prepare closing entry-post to general ledger

26. Understandability
(cash - accts revievable - inventory) turn into cash within 12 months
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
to those willing to take time to understand it
record transactions in general journal

27. Cash Principle
prepare adjusted trial balance
Retained earnings beg. balance - Net income - dividends.
Identify Accounts affected
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.

28. Dividends
longterm liabilities
prepare Unadjusted trial balance
post journal to general ledger
Debit Balance - Retained Earnings - Temporary - Owners Equity

29. Calculating Interest Formula
cost-salvage value/years of life
Close out all revenue and expense accounts into retained earnings.
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
Payment x Rate x Time

30. Unearned revenue
wages payable - utilities payable - interest payable - unearned revenue - note payable
Debit Balance - Income Statement - Temporary - expense
determine the direction of the effect. debit or credit
credit balance - balance sheet - permanent - liabilities

31. Accumulated depriciation
Assets - Liabilities - Equity
how we measure - assumes economic mean
credit balance - balance sheet - permanent - liabilities
Debit Balance - Income Statement - temporary - Expense

32. Goodwill
how we measure - assumes economic mean
debit balance - balance sheet - permanent - asset
Current Assets/Current Liabilities
wages payable - utilities payable - interest payable - unearned revenue - note payable

33. Sales revenue
Credit Balance - Balance Sheet - Permanent - owners equity
analyze transactions from external events
debit balance - balance sheet - permanent - asset
credit balance - income statement - temporary - Revenue

34. 3rd step of Accounting Cycle
prepare post-closing trial balance
determine the direction of the effect. debit or credit
companies must reduce the value of land - if the value is lower than its original cost.
prepar journal to general ledger

35. 5th step of Accounting Cycle
debit balance - balance sheet - permanent - asset
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
record adjusting entries to general journal
prepare post-closing trial balance

36. Consistency
Net Income/Sales
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
a company uses the same method each year for calculating inventory
Credit balance - income statement - temporary - revenues

37. Current Ratio
record adjusting entries to general journal
prepare adjusted trial balance
post journal to general ledger
Current Assets/Current Liabilities

38. 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
Revenues and Expenses
longterm liabilities
Contra Asset - noncurrent asset

39. 2nd step of Accounting Cycle
determine the direction of the effect. debit or credit
an appraised value for land gives additional information that is useful to investors
cost-salvage value/years of life
record transactions in general journal

40. Going Concern
(long-term) assets (building - land - equipment)
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Contributed Capital - Retained Earnings - Dividends

41. Inventory
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
longterm liabilities
prepar journal to general ledger
debit balance - Balance sheet - permanent - asset

42. Accumlated depreciation
debit balance - Balance sheet - permanent - asset
Contra Asset - noncurrent asset
cost-salvage value/years of life
determine the direction of the effect. debit or credit

43. Interest Expense
Debit Balance - Income Statement - temporary - Expense
Current Assets/Current Liabilities
debit balance - Balance sheet - permanent - asset
Credit balance - Balance sheet and Retained Earnings - Permanent

44. NonCurrent Liabilities
longterm liabilities
post journal to general ledger
to those willing to take time to understand it
prepar journal to general ledger

45. Accts on Statement of Retained Earnings
Debit Balance - Balance sheet - permanent - asset
Debit Balance - Income Statement - Temporary - expense
Retained earnings beg. balance - Net income - dividends.
Credit balance - income statement - temporary - revenues

46. 9th step of Accounting Cycle
Credit balance - Balance sheet and Retained Earnings - Permanent
prepare financial statements
prepare closing entry-post to general ledger
copyright - long term assets - noncurrent

47. 6th step of Accounting Cycle
Sales Revenues
post journal to general ledger
determine the direction of the effect. debit or credit
Current Assets/Current Liabilities

48. Monetary Unit
how we measure - assumes economic mean
Debit Balance - Retained Earnings - Temporary - Owners Equity
debit balance - Balance sheet - permanent - asset
(long-term) assets (building - land - equipment)

49. Income Satement Expenses
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
debit balance - balance sheet - permanent - asset
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
prepare financial statements

50. Income Statement Revenues
Credit Balance - Balance Sheet - permanent - liability
Identify Accounts affected
Sales Revenues
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.