Regarding the relationships of revenues and expenses to assets and liabilities,

Question

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 an increase 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) An increase in Supplies may be accompanied by an increase in Supplies Expense.

Explanation / Answer

a) True - increase in sales is revenue increase and cash or a/c recievable increase

b)True - example unearned revenue is a liabiltity which decreases when revenue is recognised

c)False -Salary payable is liability is creation of liability for salary expense incurred

d)True - Prepaid expenses is an asset when the expired portion is decreased the asset (prepaid expense decrease) and expense increase

e) False -

a) True - increase in sales is revenue increase and cash or a/c recievable increase

b)True - example unearned revenue is a liabiltity which decreases when revenue is recognised

c)False -Salary payable is liability is creation of liability for salary expense incurred

d)True - Prepaid expenses is an asset when the expired portion is decreased the asset (prepaid expense decrease) and expense increase

e) False -

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