Lecture 7

1. The relationship among assets, liabilities, and owner’s equity can be written as an equation. T
2. Assets such as cash and supplies have value because they can be used to acquire other assets or be used to operate a business T
3. The accounting equation has to be in balance to be correct T
4. the capital account is an owner’s equity T
5. Accounting is the language of business T
6. Keeping personal and business records separate is an application of the economic entity assumption T

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7. The sum of the assets and liabilities of a business always equals the investment of a business owner F
8. After each transaction, the accounting equation must remain in balance. T
9. 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. T
10. A transaction for the sale of goods or services results in a decrease in owner's equity. F
11. When cash is paid on account, a liability is increased. F
12. When cash is paid for expenses, the business has more equity. F
13. The owner's claims to the assets of a business are liabilities. F

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14. Expenses cause decreases in owner's equity and are recorded by credits F
15. For every transaction, there is at least one account affected F
16. A debit entry always decreases the balance of an account F
17. Cash is debited when the business makes a payment for supplies F
18. The debit side of all accounts decreases the balance and the credit side increases all accounts F
19. A transaction that involves more than one credit or more than one debit is called a compound entry T
20. The side of an account that increases the balance is always the same as the normal balance side. T
21. Only one account is affected in every transaction. F
22. Withdrawals increase on the debit side of the account T
23. Equipment is an example of a liability. F

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24. A sole proprietorship ends with the death of the owner. T
25. Cash is the same thing as Capital. F
26. The owner of a business paid personal rent with a company cheque. This payment reduces Cash as well as increases the expenses of the firm F
27. Accounts Receivable results from earning revenue when cash is not yet received. T
28. When expenses are greater than revenue, net income is the result F
29. Revenue and cash will always be the same amount F
30. Supplies are assets that have a longer life than equipment. F
31. Withdrawals are considered an expense of doing business F
32. An increase to utilities expense is recorded as debit T
33. Liability, revenue, and withdrawal accounts all have normal credit balances F

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34. Owner's equity is the excess of assets over its liabilities. T
35. Income increases owner's equity and is recorded by a debit. F