Accounting Basics Flashcards
7 cards from real Accounting Online Program practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Accounting Basics flashcards as text
Under accrual accounting, when is revenue recognized?
Answer: When earned, regardless of when cash is received
Accrual accounting recognizes revenue when it is earned and realizable, not necessarily when cash changes hands.
Which of the following is an example of a contra asset account?
Answer: Accumulated Depreciation
Accumulated Depreciation offsets the related asset account (e.g., Equipment) and carries a normal credit balance.
If a company has total assets of $80,000 and total liabilities of $30,000, what is owner's equity?
Answer: $50,000
Owner's equity = Total Assets − Total Liabilities = $80,000 − $30,000 = $50,000.
What type of account is 'Prepaid Insurance'?
Answer: Asset
Prepaid Insurance is a current asset representing insurance coverage paid for but not yet used.
Which depreciation method allocates an equal amount of expense each period?
Answer: Straight-line
The straight-line method spreads the depreciable cost evenly over the asset's useful life.
An adjusting entry to record accrued salaries would include:
Answer: Debit Salaries Expense, Credit Salaries Payable
Accrued salaries are recorded by debiting Salaries Expense (increasing expense) and crediting Salaries Payable (increasing liability).
Which principle states that the personal transactions of an owner should be kept separate from business transactions?
Answer: Business entity principle
The business entity principle treats the business as separate from its owner(s) for accounting purposes.