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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. Accounts on Income Statement
Revenues and Expenses
credit balance - balance sheet - permanent - liabilities
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
Sales Revenues

2. Reliability
Assets - Liabilities - Equity
Debit Balance - Income Statement - Temporary - expense
the original amount to purchase land is verifiable through the contract documents
prepare financial statements

3. Income Satement Expenses
decrease equity - debit balance
record transactions in general journal
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Debit Balance - Retained Earnings - Temporary - Owners Equity

4. Balance Sheet Assets
determine the direction of the effect. debit or credit
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Debit Balance - Income Statement - Temporary - expense

5. Accumulated depriciation
prepare post-closing trial balance
prepare closing entry-post to general ledger
credit balance - balance sheet - permanent - liabilities
the original amount to purchase land is verifiable through the contract documents

6. Closing Entries
Sales Revenues
Close out all revenue and expense accounts into retained earnings.
Debit Balance - Income Statement - Temporary - expense
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

7. Conservatism
analyze transactions from external events
companies must reduce the value of land - if the value is lower than its original cost.
credit balance - income statement - temporary - Revenue
Net Income/Sales

8. NonCurrent Assets
Contributed Capital - Retained Earnings - Dividends
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
(long-term) assets (building - land - equipment)
wages payable - utilities payable - interest payable - unearned revenue - note payable

9. Note Payable
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Credit Balance - Balance Sheet - permanent - liability
an appraised value for land gives additional information that is useful to investors
each owner has its own books - records - financial statements that are seperate.

10. 5th step of Accounting Cycle
Credit Balance - Balance Sheet - Permanent - owners equity
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
record adjusting entries to general journal
how we measure - assumes economic mean

11. Building
prepare Unadjusted trial balance
debit balance - Balance sheet - Permanent - asset
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Retained earnings beg. balance - Net income - dividends.

12. Interest Revenue
to those willing to take time to understand it
Credit Balance - Balance Sheet - Permanent - owners equity
Credit balance - income statement - temporary - revenues
post journal to general ledger

13. Accumlated depreciation
Debit Balance - Income Statement - temporary - Expense
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
Revenues-Expenses

14. Interest Expense
Debit Balance - Retained Earnings - Temporary - Owners Equity
Revenues and Expenses
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Debit Balance - Income Statement - temporary - Expense

15. Accounts Recievable
Revenues and Expenses
Debit Balance - Balance sheet - permanent - asset
Identify Accounts affected
Credit balance - income statement - temporary - revenues

16. Multistep Income Statement
credit balance - income statement - temporary - Revenue
credit balance - balance sheet - permanent - liabilities
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

17. Calculating Net Income
Sales Revenues
Contra Asset - noncurrent asset
to those willing to take time to understand it
Revenues-Expenses

18. Balance sheet Equity
wages payable - utilities payable - interest payable - unearned revenue - note payable
debit balance - Balance sheet - Permanent - asset
record adjusting entries to general journal
Contributed Capital - Retained Earnings - Dividends

19. Unearned revenue
Sales Revenues
an appraised value for land gives additional information that is useful to investors
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

20. Going Concern
Payment x Rate x Time
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Assets - Liabilities - Equity

21. 3rd step of analyzing transactions
debit balance - balance sheet - permanent - asset
(long-term) assets (building - land - equipment)
Assets - Liabilities - Equity
determine the direction of the effect. debit or credit

22. Sales revenue
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
prepare closing entry-post to general ledger
credit balance - income statement - temporary - Revenue

23. Current Ratio
prepare closing entry-post to general ledger
Close out all revenue and expense accounts into retained earnings.
Current Assets/Current Liabilities
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

24. 9th step of Accounting Cycle
prepare closing entry-post to general ledger
does the equation remain in balance?
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
credit balance - income statement - temporary - Revenue

25. Retained Earnings
Debit Balance - Balance sheet - permanent - asset
Credit balance - Balance sheet and Retained Earnings - Permanent
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.

26. 10th step of Accounting Cycle
debit balance - income statement - temporary - expense
record transactions in general journal
Identify Accounts affected
prepare post-closing trial balance

27. Dividends
a company uses the same method each year for calculating inventory
Assets - Liabilities - Equity
Current Assets/Current Liabilities
decrease equity - debit balance

28. 7th step of Accounting Cycle
credit balance - balance sheet - permanent - liabilities
prepare adjusted trial balance
post journal to general ledger
Debit Balance - Retained Earnings - Temporary - Owners Equity

29. Income Statement Revenues
Sales Revenues
debit balance - Balance sheet - Permanent - asset
Credit balance - Balance sheet and Retained Earnings - Permanent
does the equation remain in balance?

30. Profit Margin %
Net Income/Sales
copyright - long term assets - noncurrent
analyze transactions from external events
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

31. Calculating Interest Formula
prepare financial statements
Payment x Rate x Time
cost-salvage value/years of life
prepare adjusted trial balance

32. Current Assets
wages payable - utilities payable - interest payable - unearned revenue - note payable
(cash - accts revievable - inventory) turn into cash within 12 months
Credit balance - Balance sheet and Retained Earnings - Permanent
record transactions in general journal

33. Economic Equity
copyright - long term assets - noncurrent
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
each owner has its own books - records - financial statements that are seperate.
prepare financial statements

34. 3rd step of Accounting Cycle
prepare adjusted trial balance
longterm liabilities
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
prepar journal to general ledger

35. Understandability
to those willing to take time to understand it
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
prepar journal to general ledger
(long-term) assets (building - land - equipment)

36. Utilities expense
record adjusting entries to general journal
debit balance - income statement - temporary - expense
wages payable - utilities payable - interest payable - unearned revenue - note payable
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

37. Cash Principle
debit balance - Balance sheet - permanent - asset
to those willing to take time to understand it
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Retained earnings beg. balance - Net income - dividends.

38. Prepaid insurance
credit balance - income statement - temporary - Revenue
Assets - Liabilities - Equity
debit balance - balance sheet - permanent - asset
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

39. Calculating Cost depreciation
copyright - long term assets - noncurrent
cost-salvage value/years of life
Current Assets/Current Liabilities
similar to unearned revenue- liabilities

40. Goodwill
Credit balance - income statement - temporary - revenues
credit balance - balance sheet - permanent - liabilities
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
debit balance - balance sheet - permanent - asset

41. Monetary Unit
how we measure - assumes economic mean
credit balance - income statement - temporary - Revenue
prepar journal to general ledger
Credit Balance - Balance Sheet - permanent - liability

42. NonCurrent Liabilities
how we measure - assumes economic mean
longterm liabilities
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Revenues-Expenses

43. 1st step of Accounting Cycle
Credit balance - Balance sheet and Retained Earnings - Permanent
(cash - accts revievable - inventory) turn into cash within 12 months
how we measure - assumes economic mean
analyze transactions from external events

44. 8th step of Accounting Cycle
prepare financial statements
Credit balance - Balance sheet and Retained Earnings - Permanent
Revenues and Expenses
how we measure - assumes economic mean

45. Inventory
debit balance - Balance sheet - permanent - asset
Identify Accounts affected
prepare post-closing trial balance
decrease equity - debit balance

46. 6th step of Accounting Cycle
debit balance - Balance sheet - Permanent - asset
post journal to general ledger
debit balance - Balance sheet - permanent - asset
debit balance - income statement - temporary - expense

47. Dividends
debit balance - balance sheet - permanent - asset
Debit Balance - Retained Earnings - Temporary - Owners Equity
Credit balance - Balance sheet and Retained Earnings - Permanent
Current Assets/Current Liabilities

48. Common Stock
Close out all revenue and expense accounts into retained earnings.
record adjusting entries to general journal
(long-term) assets (building - land - equipment)
Credit Balance - Balance Sheet - Permanent - owners equity

49. Customer deposits
similar to unearned revenue- liabilities
copyright - long term assets - noncurrent
debit balance - Balance sheet - permanent - asset
Credit balance - Balance sheet and Retained Earnings - Permanent

50. 2nd step of analyzing transactions
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Current Assets/Current Liabilities
credit balance - balance sheet - permanent - liabilities
debit balance - Balance sheet - Permanent - asset