Accounting Chapter Two True/False Questions
An owner may withdrawal only cash from a business; other assets must remain in the business at all times for the accounting equation to be in balance.
False
Cash is increased by expenses.
False
Owner's equity is decreased by sale on account.
False
Recording an expense transaction in an accounting equation increases liabilities.
False
Three transactions that affect owner's equity are receiving cash on account, paying expenses, and paying for supplies bought on account.
False
When a company receives cash from a customer for prior sale, the transaction decreases the cash account balance and increases the accounts receivable balance.
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 received for services performed, the asset account Cash is increased and the owner's equity account is decreased.
False
A transaction for the sale of goods or services results in an increase in owner's equity.
True
A transaction that increases accounts receivable and increases owner's equity is a sale on account.
True
A withdrawal is a transaction that decreases cash and decreases owner's equity.
True
Regardless of when payment is made when services are sold, the revenue should be recorded at the time of the sale.
True
When a company makes payments for advertising and charitable contributions, the company is paying expenses.
True
When cash is paid to the owner for personal use, assets decrease and owner's equity decreases.
True
Accounts receivable is a liability account.
False