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