Accounting Unit 1 True or False

T/F? A transaction for the sale of goods or services results in a decrease in owner's equity.

False

T/F? Payments for advertising, equipment repairs, utilities, and rent are liabilities.

False

T/F? Total assets are the amount the owner has invested in the business.

False

T/F? The accounting equation is most often stated as Assets + Liabilities = Owner's equity.

False - it is Assets = Liabilities + Owner's equity

T/F? A negative amount for net worth would reflect more debt than assets, something a creditor would favor.

False because a creditor wants to see a positive effect.

T/F? A withdrawal is an expense.

False because a withdrawal is a reduction in Owner's equity.

T/F? Business ethics are the principles of right and wrong that guide an individual in making personal decisions.

False because it guides the business, not the individual.

T/F? After each transaction the accounting equation must remain in balance.

True

T/F? An expense is a decrease in owner's equity resulting from the operation of a business.

True

T/F? Detailed information about changes in owner's equity is needed by owners and managers to make sound business decisions.

True

T/F? Keeping separate the financial records for a business and for its owner's personal belongings is an application of the Business Entity accounting concept.

True

T/F? The most common type of withdrawal by an owner from a business is the withdrawal of cash or equipment.

True

T/F? When an owner withdraws cash from the business, the transaction affects both assets and owner's equity.

True

T/F? 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

T/F? When two asset accounts are changed in a transaction, there must be and increase and a decrease.

True