Accounting 1A Review (Part 1)

The accounting equation is most often stated as: Assets + Liabilities = Owner's Equity.

• True

• False

The accounting equation must be in balance to be correct.

• True

• False

When cash is paid for supplies, assets increase and liabilities decrease.

• True

• False

When a company pays insurance premiums in advance to an insurer, it records the payment as a liability because the insurer owes future coverage.

• True

• False

When cash is paid on account, a liability is increased.

• True

• False

The capital account is a liability account.

• True

• False

Revenue from a sale on account should be recorded when the payment is received.

• True

• False

Withdrawals are assets taken out of a business for the owner's personal use.

• True

• False

Each asset account has a normal debit balance.

• True

• False

Each transaction changes the balances in at least two accounts.

• True

• False