Basic Accounting Terms Quiz
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Questions and Answers

What does Accounts Payable (AP) refer to?

  • Assets that a company owns
  • Expenses incurred but not yet paid (correct)
  • Liabilities that have been settled
  • Revenue collected but not yet earned

    • What does Accounts Receivable (AR) include?

  • Assets sold and collected
  • Revenue earned but not yet collected (correct)
  • Expenses incurred but not yet paid
  • Liabilities settled

    • What is an Accrued Expense?

    An expense that has been incurred but hasn't been paid.

    What does Asset (A) refer to?

    <p>Anything that has monetary value.</p> Signup and view all the answers

    What is a Balance Sheet (BS)?

    <p>A financial statement that reports on all of a company's assets, liabilities, and equity.</p> Signup and view all the answers

    What is Book Value (BV)?

    <p>As an asset is depreciated, it loses value.</p> Signup and view all the answers

    What does Equity (E) denote?

    <p>The value left over after liabilities have been removed.</p> Signup and view all the answers

    What is Inventory?

    <p>Assets that a company has purchased to sell to its customers that remain unsold.</p> Signup and view all the answers

    What does Liability (L) refer to?

    <p>All debts that a company has yet to pay.</p> Signup and view all the answers

    What are Cost of Goods Sold (COGS)?

    <p>Expenses that directly relate to the creation of a product or service.</p> Signup and view all the answers

    What is Depreciation?

    <p>An expense that appears on the Income Statement and is often categorized as a 'Non-Cash Expense'.</p> Signup and view all the answers

    What is an Expense?

    <p>Any cost incurred by the business.</p> Signup and view all the answers

    What is Gross Margin (GM)?

    <p>A percentage calculated by taking Gross Profit and dividing by Revenue for the same period.</p> Signup and view all the answers

    What is Gross Profit (GP)?

    <p>Calculated by subtracting Cost of Goods Sold from Revenue for the same period.</p> Signup and view all the answers

    What does the Income Statement (IS or P&L) show?

    <p>The revenues, expenses, and profits over a given time period.</p> Signup and view all the answers

    What is Net Income (NI)?

    <p>The dollar amount that is earned in profits.</p> Signup and view all the answers

    What is Net Margin?

    <p>The percent amount that illustrates the profit of a company in relation to its Revenue.</p> Signup and view all the answers

    What does Revenue (Sales) (Rev) mean?

    <p>Any money earned by the business.</p> Signup and view all the answers

    What is an Accounting Period?

    <p>Designated in all Financial Statements.</p> Signup and view all the answers

    What does Allocation mean?

    <p>The procedure of assigning funds to various accounts or periods.</p> Signup and view all the answers

    What is a Business (or Legal) Entity?

    <p>The legal structure, or type, of a business.</p> Signup and view all the answers

    What is Cash Flow (CF)?

    <p>The inflow and outflow of cash in a business.</p> Signup and view all the answers

    What does Certified Public Accountant (CPA) signify?

    <p>A professional designation that an accountant can earn by passing the CPA exam.</p> Signup and view all the answers

    What is Credit?

    <p>An increase in a liability or equity account, or a decrease in an asset or expense account.</p> Signup and view all the answers

    What is Debit?

    <p>An increase in an asset or expense account, or a decrease in a liability or equity account.</p> Signup and view all the answers

    What does Diversification mean?

    <p>A method of reducing risk.</p> Signup and view all the answers

    What is an Enrolled Agent (EA)?

    <p>A professional accounting designation assigned to professionals showing expertise in business and personal taxes.</p> Signup and view all the answers

    What is a Fixed Cost (FC)?

    <p>One that does not change with the volume of sales.</p> Signup and view all the answers

    What does General Ledger (GL) represent?

    <p>The complete record of a company's financial transactions.</p> Signup and view all the answers

    What are Generally Accepted Accounting Principles (GAAP)?

    <p>The rules that all accountants abide by when performing the act of accounting.</p> Signup and view all the answers

    What is Interest?

    <p>The amount paid on a loan or line of credit that exceeds the repayment of the principal balance.</p> Signup and view all the answers

    What is a Journal Entry (JE)?

    <p>How updates and changes are made to a company's books.</p> Signup and view all the answers

    What does Liquidity refer to?

    <p>How quickly something can be converted into cash.</p> Signup and view all the answers

    Study Notes

    Basic Accounting Terms

    • Accounts Payable (AP): Represents expenses incurred by a business that are not yet paid, indicating short-term liabilities.

    • Accounts Receivable (AR): Includes revenue generated from sales that has not yet been collected, showcasing potential incoming cash flow.

    • Accrued Expense: Refers to expenses recognized in the accounting period that are unpaid, emphasizing the need for accurate financial reporting.

    • Asset (A): Anything of monetary value owned by a business, including physical and intangible items.

    • Balance Sheet (BS): A financial statement presenting a company's assets, liabilities, and equity at a specific point in time, used for assessing financial health.

    • Book Value (BV): The value of an asset after depreciation, essential for understanding valuation over time.

    • Equity (E): Represents the residual value of assets after liabilities are deducted, critical for shareholders and owners.

    • Inventory: Classifies assets purchased for resale that remain unsold, important for assessing stock and cash flow management.

    • Liability (L): All obligations a company owes, emphasizing the need to manage debts effectively.

    • Cost of Goods Sold (COGS): Direct expenses related to the production of goods and services, vital for profitability analysis.

    • Depreciation (Dep): Non-cash expense appearing on the Income Statement, representing the reduction in asset value over time.

    • Expense (Cost): Any cost incurred by a business, vital for calculating net income and monitoring financial performance.

    • Gross Margin (GM): Percentage derived from Gross Profit divided by Revenue, useful for assessing product profitability.

    • Gross Profit (GP): Calculated by subtracting COGS from Revenue, a critical metric for gauging operational efficiency.

    • Income Statement (Profit and Loss) (IS or P&L): Financial document detailing revenues, expenses, and profitability over a designated period.

    • Net Income (NI): The profit earned after all expenses are deducted, an essential measure of a company's financial success.

    • Net Margin: Percentage reflecting profit as a portion of revenue, key for comparing profitability across companies.

    • Revenue (Sales) (Rev): All income earned through business operations, foundational for assessing business performance.

    • Accounting Period: A specified timeframe identified in financial statements for reporting purposes.

    • Allocation: The process of distributing funds across various accounts or periods, important for budget management.

    • Business (or Legal) Entity: The formal structure of a business, impacting taxes, liability, and reporting requirements.

    • Cash Flow (CF): Involves tracking the inflow and outflow of cash, crucial for maintaining liquidity.

    • Certified Public Accountant (CPA): A professional accountant designation achieved through exam and experience requirements, indicating expertise in accounting.

    • Credit: Represents an increase in liabilities/equity or a decrease in assets/expenses, fundamental in double-entry accounting.

    • Debit: The opposite of credit; it indicates an increase in assets/expenses or a decrease in liabilities/equity.

    • Diversification: A strategy used to reduce financial risk through varied investments, promoting stability in revenues.

    • Enrolled Agent (EA): A tax professional certified to represent taxpayers before the IRS, emphasizing tax compliance expertise.

    • Fixed Cost (FC): Costs that remain constant regardless of sales volume, important for budgeting and pricing strategies.

    • General Ledger (GL): A comprehensive record of all financial transactions within a business, essential for maintaining accounting accuracy.

    • Generally Accepted Accounting Principles (GAAP): The standardized guidelines accountants must follow for consistency and transparency in financial reporting.

    • Interest: The cost associated with borrowing, significantly impacting overall loan expenses and profitability.

    • Journal Entry (JE): The method of recording changes in financial accounts, critical for maintaining accurate financial records.

    • Liquidity: The ease with which an asset can be converted into cash, vital for assessing financial solvency.

    • Material: A term referring to items or information that could influence financial decisions, important for transparency and risk assessment.

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    Description

    Test your knowledge of fundamental accounting terms and concepts. This quiz covers important definitions like accounts payable, accounts receivable, and balance sheets. Perfect for students and professionals looking to refresh their accounting vocabulary.

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