Bus 020 T/F

Purchasing supplies for cash results in an increase in total assets for the purchasing
company

• True

• False

The normal balance for an asset account is a debit and the normal balance for a liability
account is a credit

• True

• False

An objective of preparing the trial balance is to test the equality of debits and credits

• True

• False

Current liabilities are defined as obligations to be paid within six months

• True

• False

Answer explanation

All short term liabilities can be paid within the year

The current ratio measures the ability of a company to pay its short-term obligations with
short-term assets

• True

• False

According to the revenue realization principle, revenue is recognized at the time that cash
is collected from a customer for services to be provided in the future.

• True

• False

According to the matching principle, salary expense is recognized on the income
statement when the salaries are paid rather than when the employee provides the work

• True

• False

Under accrual accounting, rent expense for February, 2024 would be recognized on the
income statement in February, 2024 even though it had been paid for in January

• True

• False

Using cash to purchase office supplies, which will be consumed later, results in an
increase in expenses and a decrease in assets at the time of purchase.

• True

• False

Revenue accounts have credit balances because they increase stockholders' equity

• True

• False