Indicate whether each of the following statements is true or false.________ a) The entry to record the purchase of supplies involves a debit to Supplies Expense and a credit to Cash.________ b) The entry to record the amount of supplies used involves a debit to Supplies Expense and a credit to Supplies.________ c) An asset use transaction may involve a debit to an asset and a credit to a liability.________ d) An asset exchange transaction may involve a debit to an asset and a credit to a liability.________ e) A claims exchange transaction may involve a debit to a liability and a credit to revenue.

Question

What will be an ideal response?

Answer 1

a) F b) T c) F d) F e) T

a) This is false. The entry to record the purchase of supplies involves a debit to supplies (to increase that asset account) and a credit to cash (to decrease that asset account).
b) This is true. Expenses are recorded with debits and decreases to assets are recorded with credits. The entry to record the use of supplies involves a debit to supplies expense and a credit to supplies.
c) This is false. An asset use transaction involves a decrease to assets, which is recorded with a credit.
d) This is false. A debit to an asset account and a credit to a liability would describe an asset source transaction (rather than an asset exchange transaction).
e) This is true. A claims exchange transaction may involve a debit to a liability (decreasing it) and a credit to revenue (increasing it). This would be made when recognizing revenue that had been collected in advance (and deferred).