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) Recording a decrease in assets may be associated with an increase in an expense account.________ d) A decrease in Supplies will be accompanied by an increase in Supplies Expense.
Fill in the blank(s) with the appropriate word(s).
a) F b) T c) T d) 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 true. Recording a decrease in assets (such as prepaid rent or insurance, or supplies) may be associated with an increase in expenses.
d) This is true. Supplies expense is increased when supplies are used, or decreased.
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