Regarding the relationships of revenues and expenses to assets and liabilities, state whether each of the following statements is true or false.________ a) Recording an increase in a revenue account may be associated with a decrease in assets.________ b) Recording an increase in a revenue account may be associated with a decrease in liabilities.________ c) An increase in Salaries Expense may be accompanied by a decrease in Salaries Payable.________ d) Recording a decrease in assets may be associated with an increase in an expense account.________ e) A decrease in Supplies will be accompanied by an increase in Supplies Expense.
What will be an ideal response?
a) F b) T c) F d) T e) T
a) This is false. An increase in a revenue account is usually associated with an increase in assets, such as cash or accounts receivable.
b) This is true. Recording an increase in revenue may be associated with a decrease in liabilities, as in the case of earning revenue from a prepaid contract (unearned revenue).
c) This is false. An increase in salaries expense could be accompanied by an increase in salaries payable, as in the case of accruing salaries expense, but not a decrease.
d) This is true. Recording a decrease in assets (such as prepaid rent or insurance, or supplies) may be associated with an increase in expenses.
e) This is true. Supplies expense is increased when supplies are used, or decreased.
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