Accounting II True and False Part 1 & 2

When an owner invests cash in a business, owner's equity decreases.

False

When cash is paid for expenses, the business has less cash; therefore, the asset account Cash is decreased and the owner's equity account is increased.

False

When cash is paid for supplies, assets increase and liabilities decrease.

False

When cash is paid on account, a liability is increased.

False

The amount in an account is an account balance.

True

The balance of an account decreases on the side opposite the normal balance side.

True

The capital account is an owner's equity account.

True

When two asset accounts are changed in a transaction, there must be an increase and a decrease.

True

A drawing account is decreased by debits and increased by credits.

False

A revenue transaction decreases the sum of the balances on the left side of an accounting equation.

False

A withdrawal is an expense.

False

Accounts payable accounts are increased with a debit.

False

An amount recorded on the left side of a T account is a credit.

False

Anything of value that is owned is a liability.

False

Asset accounts are listed on the right side of the accounting equation.

False

Asset accounts increase on the credit side.

False

Capital is an owner's equity account with a normal debit balance.

False

Cash is an asset account with a normal credit balance.

False

Cash is increased with a credit.

False

Christine Jones, Drawing is increased with a credit.

False

Common accounting practice is to record withdrawals as debits directly in the owner's capital account.

False

If two amounts are recorded on the same side of the accounting equation, the equation will no longer be in balance.

False

Increases in expense accounts are recorded directly in the owner's capital account.

False

Increases in revenue accounts are recorded as debits because they increase the owner's capital account.

False

Revenue from a sale on account should be recorded when the payment is received.

False

Revenue is a decrease in owner's equity resulting from the operation of a business.

False

The accounting equation does not have to be in balance to be correct.

False

The accounting equation is most often stated as: Assets + Liabilities = Owner's Equity.

False

The capital account is a liability account.

False

The capital account is the owner's liability account.

False

The left side of a liability account is the normal balance side because liabilities are on the left side of the accounting equation.

False

The left side of an asset account is the credit side because assets accounts are on the left side of the accounting equation.

False

The normal balance side of an accounts receivable account is a credit.

False

The sum of the assets and liabilities of a business always equals the investment of the business owner.

False

The total debits and credits for a transaction do not have to equal.

False

To summarize withdrawal information separately from the other records, owner withdrawal transactions are recorded in the owner's capital account.

False

When a business pays cash for insurance, a liability is increased.

False

When a company pays insurance premiums in advance to an insurer, it records the payment as a liability because the insurer owes future coverage

False

When an account on one side of the accounting equation is increased, there must also be an increase on the other side to keep the equation in balance.

False

A proprietorship is also known as a sole proprietorship

True

A record summarizing all the information pertaining to a single item in the accounting equation is an account.

True

A transaction for the sale of goods or services results in an increase in owner's equity.

True

A transaction is a normal business activity that changes assets, liabilities, or owner's equity.

True

A transaction that increases accounts receivable and increases owner's equity is a sale on account.

True

Accounting is the language of business.

True

Accounts Receivable (Zwilling Company) is increased with a debit.

True

Accounts receivable accounts are increased with a debit.

True

Advertising Expense is increased with a debit.

True

After each transaction, the accounting equation must remain in balance.

True

An accounting device used to analyze transactions is a T account.

True

Asset accounts are listed on the left side of the accounting equation.

True

Assets have value because they can be used to acquire other assets or to operate the business.

True

Assets such as cash and supplies have value because they can be used to acquire other assets or to operate a business.

True

Before a transaction is recorded in the records of a business, it is analyzed to determine which accounts are changed and how.

True

Businesses use accounts to summarize all the information pertaining to a single item.

True

Christine Jones, Drawing is decreased with a credit.

True

Each asset account has a normal debit balance.

True

Each liability account has a normal credit balance.

True

Each transaction changes the balances in at least two accounts.

True

In the United States, business transactions are recorded in U.S. dollars.

True

Increases in expense accounts are recorded as debits because they decrease the owner's capital account.

True

Individuals or other businesses to which a business owes money have rights to the business's assets.

True

Keeping personal and business records separate is an application of the business entity concept.

True

Prepaid Insurance is decreased with a credit.

True

Regardless of when payment is made when services are sold, the revenue should be recorded at the time of the sale.

True

The accounting equation must be in balance to be correct.

True

The balance of a drawing account represents the total value of assets taken out of a business by the owner.

True

The balance of an account increases on the same side as the normal balance side.

True

The normal balance side of an accounts payable account is a credit

True

The normal balance side of an asset account is based on the location of the account in the accounting equation.

True

The relationship among assets, liabilities, and owner's equity can be written as an equation

True

When a company makes a sale of $300.00, assets and owner's equity increase by $300.00.

True

When cash is paid for supplies, the supplies account is increased by a debit.

True

When financial records for a business and for its owner's personal belongings are not mixed, this is an application of the Business Entity accounting concept.

True

When items are bought and paid for at a future date, another way to state this is to say these items are bought on account.

True

Withdrawals are assets taken out of a business for the owner's personal use.

True

A decrease in owner's equity because of a withdrawal is a result of the normal operations of a business.

False

A business has two types of equities.

True

A business that performs an activity for a fee is a service business.

True

A list of accounts used by a business is a chart of accounts

True