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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. NonCurrent Liabilities
Contra Asset - noncurrent asset
prepare Unadjusted trial balance
longterm liabilities
does the equation remain in balance?

2. Dividends
Sales Revenues
Contributed Capital - Retained Earnings - Dividends
does the equation remain in balance?
decrease equity - debit balance

3. Monetary Unit
Sales Revenues
does the equation remain in balance?
how we measure - assumes economic mean
debit balance - income statement - temporary - expense

4. 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
a company uses the same method each year for calculating inventory
Assets - Liabilities - Equity
similar to unearned revenue- liabilities

5. 7th step of Accounting Cycle
similar to unearned revenue- liabilities
(long-term) assets (building - land - equipment)
prepare adjusted trial balance
Credit balance - income statement - temporary - revenues

6. Building
(cash - accts revievable - inventory) turn into cash within 12 months
Sales Revenues
an appraised value for land gives additional information that is useful to investors
debit balance - Balance sheet - Permanent - asset

7. Reliability
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
the original amount to purchase land is verifiable through the contract documents
each owner has its own books - records - financial statements that are seperate.
a company uses the same method each year for calculating inventory

8. Current Ratio
Current Assets/Current Liabilities
Payment x Rate x Time
(long-term) assets (building - land - equipment)
Debit Balance - Retained Earnings - Temporary - Owners Equity

9. NonCurrent Assets
cost-salvage value/years of life
record adjusting entries to general journal
determine the direction of the effect. debit or credit
(long-term) assets (building - land - equipment)

10. Goodwill
credit balance - balance sheet - permanent - liabilities
Contra Asset - noncurrent asset
Sales Revenues
debit balance - balance sheet - permanent - asset

11. Current Assets
does the equation remain in balance?
prepare post-closing trial balance
(cash - accts revievable - inventory) turn into cash within 12 months
Debit Balance - Income Statement - Temporary - expense

12. Accumulated depriciation
Credit balance - Balance sheet and Retained Earnings - Permanent
each owner has its own books - records - financial statements that are seperate.
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
credit balance - balance sheet - permanent - liabilities

13. Common Stock
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
Credit Balance - Balance Sheet - Permanent - owners equity
copyright - long term assets - noncurrent

14. Materiality

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15. 3rd step of analyzing transactions
Revenues-Expenses
determine the direction of the effect. debit or credit
credit balance - balance sheet - permanent - liabilities
cost-salvage value/years of life

16. Accounts on Income Statement
wages payable - utilities payable - interest payable - unearned revenue - note payable
Contra Asset - noncurrent asset
Assets - Liabilities - Equity
Revenues and Expenses

17. 1st Step of Analying Transactions
Identify Accounts affected
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Payment x Rate x Time
a company uses the same method each year for calculating inventory

18. Cost of Goods Sold
Debit Balance - Income Statement - Temporary - expense
Current Assets/Current Liabilities
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
determine the direction of the effect. debit or credit

19. Note Payable
Credit Balance - Balance Sheet - permanent - liability
the original amount to purchase land is verifiable through the contract documents
prepare financial statements
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

20. 1st step of Accounting Cycle
analyze transactions from external events
Credit balance - income statement - temporary - revenues
Revenues-Expenses
a company uses the same method each year for calculating inventory

21. 6th step of Accounting Cycle
post journal to general ledger
cost-salvage value/years of life
Revenues and Expenses
analyze transactions from external events

22. 3rd step of Accounting Cycle
prepar journal to general ledger
Debit Balance - Income Statement - temporary - Expense
wages payable - utilities payable - interest payable - unearned revenue - note payable
Close out all revenue and expense accounts into retained earnings.

23. Intangibles
copyright - long term assets - noncurrent
prepare closing entry-post to general ledger
prepare adjusted trial balance
Assets - Liabilities - Equity

24. Income Statement Revenues
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Sales Revenues
record adjusting entries to general journal
wages payable - utilities payable - interest payable - unearned revenue - note payable

25. Inventory
cost-salvage value/years of life
debit balance - Balance sheet - permanent - asset
a company uses the same method each year for calculating inventory
Debit Balance - Income Statement - temporary - Expense

26. Utilities expense
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
to those willing to take time to understand it
debit balance - income statement - temporary - expense
an appraised value for land gives additional information that is useful to investors

27. Calculating Cost depreciation
credit balance - balance sheet - permanent - liabilities
cost-salvage value/years of life
prepare financial statements
how we measure - assumes economic mean

28. Income Satement Expenses
cost-salvage value/years of life
Contra Asset - noncurrent asset
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
Credit balance - income statement - temporary - revenues

29. Relevance
does the equation remain in balance?
record adjusting entries to general journal
an appraised value for land gives additional information that is useful to investors
(long-term) assets (building - land - equipment)

30. 4th step of Accounting Cycle
prepare Unadjusted trial balance
(long-term) assets (building - land - equipment)
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
copyright - long term assets - noncurrent

31. Conservatism
companies must reduce the value of land - if the value is lower than its original cost.
Revenues-Expenses
determine the direction of the effect. debit or credit
Debit Balance - Income Statement - Temporary - expense

32. Balance Sheet Assets
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
prepare financial statements
record transactions in general journal
a company uses the same method each year for calculating inventory

33. Accounts Recievable
Debit Balance - Balance sheet - permanent - asset
Contra Asset - noncurrent asset
Debit Balance - Income Statement - temporary - Expense
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

34. Going Concern
cost-salvage value/years of life
Credit balance - income statement - temporary - revenues
debit balance - income statement - temporary - expense
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

35. Unearned revenue
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.
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
Assets - Liabilities - Equity

36. 4th step of analyzing transactions
does the equation remain in balance?
Credit balance - Balance sheet and Retained Earnings - Permanent
wages payable - utilities payable - interest payable - unearned revenue - note payable
Contributed Capital - Retained Earnings - Dividends

37. 2nd step of Accounting Cycle
record transactions in general journal
cost-salvage value/years of life
decrease equity - debit balance
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

38. Accts on Statement of Retained Earnings
Retained earnings beg. balance - Net income - dividends.
Debit Balance - Income Statement - temporary - Expense
Debit Balance - Income Statement - Temporary - expense
copyright - long term assets - noncurrent

39. Accounting Equation
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
credit balance - balance sheet - permanent - liabilities
Retained earnings beg. balance - Net income - dividends.
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

40. 8th step of Accounting Cycle
prepare financial statements
how we measure - assumes economic mean
Assets - Liabilities - Equity
a company uses the same method each year for calculating inventory

41. Interest Revenue
Credit balance - income statement - temporary - revenues
debit balance - income statement - temporary - expense
Contributed Capital - Retained Earnings - Dividends
debit balance - balance sheet - permanent - asset

42. Understandability
Contributed Capital - Retained Earnings - Dividends
debit balance - Balance sheet - Permanent - asset
to those willing to take time to understand it
an appraised value for land gives additional information that is useful to investors

43. Cash Principle
does the equation remain in balance?
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
wages payable - utilities payable - interest payable - unearned revenue - note payable
prepare Unadjusted trial balance

44. Profit Margin %
Payment x Rate x Time
the original amount to purchase land is verifiable through the contract documents
Net Income/Sales
longterm liabilities

45. Accts on balance sheet
Sales Revenues
prepare Unadjusted trial balance
prepare post-closing trial balance
Assets - Liabilities - Equity

46. Calculating Net Income
cost-salvage value/years of life
Revenues-Expenses
to those willing to take time to understand it
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense

47. Interest Expense
a company uses the same method each year for calculating inventory
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
(long-term) assets (building - land - equipment)
Debit Balance - Income Statement - temporary - Expense

48. Balance Sheet Liabilities
each owner has its own books - records - financial statements that are seperate.
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
wages payable - utilities payable - interest payable - unearned revenue - note payable

49. 2nd step of analyzing transactions
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue
Credit balance - income statement - temporary - revenues
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
record adjusting entries to general journal

50. 5th step of Accounting Cycle
each owner has its own books - records - financial statements that are seperate.
Net Income/Sales
prepare Unadjusted trial balance
record adjusting entries to general journal