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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. Calculating Interest Formula
Payment x Rate x Time
credit balance - balance sheet - permanent - liabilities
Credit balance - income statement - temporary - revenues
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.

2. Unearned revenue
decrease equity - debit balance
Payment x Rate x Time
debit balance - balance sheet - permanent - asset
credit balance - balance sheet - permanent - liabilities

3. NonCurrent Liabilities
credit balance - balance sheet - permanent - liabilities
the original amount to purchase land is verifiable through the contract documents
Credit balance - income statement - temporary - revenues
longterm liabilities

4. Dividends
decrease equity - debit balance
Revenues and Expenses
analyze transactions from external events
prepare Unadjusted trial balance

5. Dividends
an appraised value for land gives additional information that is useful to investors
Debit Balance - Retained Earnings - Temporary - Owners Equity
prepare financial statements
longterm liabilities

6. Current Assets
cost-salvage value/years of life
(cash - accts revievable - inventory) turn into cash within 12 months
analyze transactions from external events
Debit Balance - Income Statement - Temporary - expense

7. Prepaid insurance
decrease equity - debit balance
a company uses the same method each year for calculating inventory
debit balance - balance sheet - permanent - asset
Credit Balance - Balance Sheet - Permanent - owners equity

8. Building
prepare Unadjusted trial balance
the original amount to purchase land is verifiable through the contract documents
prepare post-closing trial balance
debit balance - Balance sheet - Permanent - asset

9. Inventory
to those willing to take time to understand it
prepare financial statements
debit balance - Balance sheet - permanent - asset
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>

10. Current Ratio
Debit Balance - Income Statement - Temporary - expense
Credit balance - income statement - temporary - revenues
prepare financial statements
Current Assets/Current Liabilities

11. Sales revenue
Debit Balance - Income Statement - temporary - Expense
credit balance - income statement - temporary - Revenue
Current Assets/Current Liabilities
longterm liabilities

12. Cash Principle
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
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.
Payment x Rate x Time

13. Accounts Recievable
Close out all revenue and expense accounts into retained earnings.
Contributed Capital - Retained Earnings - Dividends
Debit Balance - Balance sheet - permanent - asset
determine the direction of the effect. debit or credit

14. 9th step of Accounting Cycle
debit balance - income statement - temporary - expense
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.
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

15. Customer deposits
longterm liabilities
Assets - Liabilities - Equity
copyright - long term assets - noncurrent
similar to unearned revenue- liabilities

16. Economic Equity
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
does the equation remain in balance?
debit balance - Balance sheet - permanent - asset
each owner has its own books - records - financial statements that are seperate.

17. 1st Step of Analying Transactions
how we measure - assumes economic mean
Identify Accounts affected
credit balance - income statement - temporary - Revenue
copyright - long term assets - noncurrent

18. Relevance
debit balance - balance sheet - permanent - asset
Retained earnings beg. balance - Net income - dividends.
Sales-CGS=Gross Profit-selling expenses-admin expenses=Incom for operations+interest revenue-Interest expense=Income before tax-tax expense=Net income
an appraised value for land gives additional information that is useful to investors

19. Accounting Equation
Close out all revenue and expense accounts into retained earnings.
Credit Balance - Balance Sheet - Permanent - owners equity
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Credit balance - income statement - temporary - revenues

20. Going Concern
assumes business will fully indefinitely ink the foreseeable futyre - justifies one of historical cost.
how we measure - assumes economic mean
companies must reduce the value of land - if the value is lower than its original cost.
debit balance - income statement - temporary - expense

21. Income Satement Expenses
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
debit balance - income statement - temporary - expense
(cash - accts revievable - inventory) turn into cash within 12 months
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments

22. Cost of Goods Sold
debit balance - balance sheet - permanent - asset
(long-term) assets (building - land - equipment)
Contributed Capital - Retained Earnings - Dividends
Debit Balance - Income Statement - Temporary - expense

23. 4th step of Accounting Cycle
prepare Unadjusted trial balance
a company uses the same method each year for calculating inventory
debit balance - balance sheet - permanent - asset
Retained earnings beg. balance - Net income - dividends.

24. 8th step of Accounting Cycle
debit balance - Balance sheet - permanent - asset
Contra Asset - noncurrent asset
debit balance - balance sheet - permanent - asset
prepare financial statements

25. Accounts on Income Statement
an appraised value for land gives additional information that is useful to investors
Debit Balance - Balance sheet - permanent - asset
Debit Balance - Retained Earnings - Temporary - Owners Equity
Revenues and Expenses

26. Income Statement Revenues
Debit Balance - Income Statement - temporary - Expense
prepare financial statements
Sales Revenues
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.

27. Interest Expense
how we measure - assumes economic mean
Credit balance - Balance sheet and Retained Earnings - Permanent
Close out all revenue and expense accounts into retained earnings.
Debit Balance - Income Statement - temporary - Expense

28. 1st step of Accounting Cycle
prepare adjusted trial balance
credit balance - income statement - temporary - Revenue
Credit balance - Balance sheet and Retained Earnings - Permanent
analyze transactions from external events

29. Accumlated depreciation
companies must use GAAP for all significant transactions that will affect an investor's decisions - but insignificant transactions may be treated in alternative ways.
Contra Asset - noncurrent asset
Debit Balance - Income Statement - Temporary - expense
prepare post-closing trial balance

30. 7th step of Accounting Cycle
credit balance - income statement - temporary - Revenue
Debit Balance - Balance sheet - permanent - asset
Sales Revenues
prepare adjusted trial balance

31. 2nd step of Accounting Cycle
credit balance - balance sheet - permanent - liabilities
record transactions in general journal
companies must reduce the value of land - if the value is lower than its original cost.
Contributed Capital - Retained Earnings - Dividends

32. Calculating Cost depreciation
Debit Balance - Income Statement - temporary - Expense
credit balance - balance sheet - permanent - liabilities
the original amount to purchase land is verifiable through the contract documents
cost-salvage value/years of life

33. Retained Earnings
Current Assets/Current Liabilities
cost-salvage value/years of life
Credit balance - Balance sheet and Retained Earnings - Permanent
prepare post-closing trial balance

34. 2nd step of analyzing transactions
a company uses the same method each year for calculating inventory
does the equation remain in balance?
to those willing to take time to understand it
clarify accounts as Asset - Liabilities - Owners Equity - Expense - Revenue

35. 3rd step of Accounting Cycle
credit balance - balance sheet - permanent - liabilities
Debit Balance - Retained Earnings - Temporary - Owners Equity
prepar journal to general ledger
how we measure - assumes economic mean

36. Materiality

37. Accts on balance sheet
prepare closing entry-post to general ledger
debit balance - balance sheet - permanent - asset
Assets - Liabilities - Equity
Credit balance - income statement - temporary - revenues

38. Balance Sheet Liabilities
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
record adjusting entries to general journal
(long-term) assets (building - land - equipment)
wages payable - utilities payable - interest payable - unearned revenue - note payable

39. Understandability
cost-salvage value/years of life
to those willing to take time to understand it
Identify Accounts affected
Retained earnings beg. balance - Net income - dividends.

40. 4th step of analyzing transactions
cost-salvage value/years of life
does the equation remain in balance?
(cash - accts revievable - inventory) turn into cash within 12 months
Debit Balance - Income Statement - Temporary - expense

41. Note Payable
Close out all revenue and expense accounts into retained earnings.
prepare post-closing trial balance
record assets of cost paid to acquire them - continue to value assets at historical cost until sold - more objective than market cost.
Credit Balance - Balance Sheet - permanent - liability

42. 6th step of Accounting Cycle
post journal to general ledger
does the equation remain in balance?
Assets= Liabilities+Owners Equity<Contributed Capital><Retained Earnings-Revenues - Expenses>
Payment x Rate x Time

43. Accumulated depriciation
cost-salvage value/years of life
wages payable - utilities payable - interest payable - unearned revenue - note payable
Cost of Goods Sold - Utilities Expense - Supplies Expense - Wages Expense - Depreciation Expense - Interest Expense - Rent Expense
credit balance - balance sheet - permanent - liabilities

44. Balance Sheet Assets
similar to unearned revenue- liabilities
Cash - Accounts recievable - supplies - inventory - prepaid rent - equipment - accumulated depreciation - goodwill - investments
Credit Balance - Balance Sheet - Permanent - owners equity
Assets - Liabilities - Equity

45. NonCurrent Assets
Credit balance - Balance sheet and Retained Earnings - Permanent
(long-term) assets (building - land - equipment)
analyze transactions from external events
prepare closing entry-post to general ledger

46. Profit Margin %
Net Income/Sales
prepare adjusted trial balance
the original amount to purchase land is verifiable through the contract documents
Identify Accounts affected

47. Utilities expense
debit balance - income statement - temporary - expense
prepare financial statements
credit balance - balance sheet - permanent - liabilities
longterm liabilities

48. Accts on Statement of Retained Earnings
prepare closing entry-post to general ledger
Retained earnings beg. balance - Net income - dividends.
Contra Asset - noncurrent asset
prepare Unadjusted trial balance

49. Goodwill
prepare closing entry-post to general ledger
debit balance - balance sheet - permanent - asset
Credit balance - Balance sheet and Retained Earnings - Permanent
prepare post-closing trial balance

50. Reliability
debit balance - Balance sheet - permanent - asset
debit balance - balance sheet - permanent - asset
Debit Balance - Income Statement - temporary - Expense
the original amount to purchase land is verifiable through the contract documents