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False
1. Payments for advertising, equipment repairs, utilities, and rent are liabilities.

2. When an owner withdraws cash from the business, the transaction affects both assets and owner’s equity.

3. A negative amount for net worth would reflect more debt than assets, something a creditor would favor.

4. The most common type of withdrawal by an owner from a business is the withdrawal of cash.

5. After each transaction, the accounting equation must remain in balance.

6. A transaction for the sale of goods or services results in a decrease in owner’s equity.

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

8. When two asset accounts are changed in a transaction, there must be an increase and a decrease.

9. Keeping separate financial records for a business and for its owner’s personal belongings is an application of the Business Entity accounting concept.

10. When items are bought and paid for at a future date, another way to state this is to say these items are bought on account.

11. A withdrawal is an expense.

12. Business ethics are the principles of right and wrong that guide an individual in making personal decisions.

13. Total assets are the amount the owner has invested in the business.

14. An expense is a decrease in owner’s equity resulting from the operation of a business.

15. Detailed information about changes in owner’s equity is needed by owners and managers to make sound business decisions.

1 answer

Here are the answers to the true/false statements provided:

  1. False - Payments for advertising, equipment repairs, utilities, and rent are expenses, not liabilities. Liabilities are obligations owed to others.

  2. True - When an owner withdraws cash from the business, it decreases both the assets (cash) and the owner’s equity.

  3. False - A negative amount for net worth reflects more debt than assets, which is generally unfavorable for creditors.

  4. True - The most common type of withdrawal by an owner from a business is indeed the withdrawal of cash.

  5. True - After each transaction, the accounting equation (Assets = Liabilities + Owner's Equity) must remain in balance.

  6. False - A transaction for the sale of goods or services typically results in an increase in owner’s equity due to revenue generated.

  7. False - The accounting equation is stated as Assets = Liabilities + Owner's Equity, not the other way around.

  8. True - When two asset accounts are changed in a transaction, it typically involves an increase in one account and a decrease in another.

  9. True - Keeping separate financial records for a business and for its owner’s personal belongings is an application of the Business Entity accounting concept.

  10. True - When items are bought and paid for at a future date, it is accurate to say these items are bought on account.

  11. False - A withdrawal is not classified as an expense; it is a reduction of equity.

  12. True - Business ethics refer to the principles of right and wrong that guide individuals in making decisions within a business context.

  13. False - Total assets represent what the company owns, while the amount the owner has invested in the business is part of owner’s equity.

  14. True - An expense indeed results in a decrease in owner’s equity due to the costs incurred in the operation of a business.

  15. True - Detailed information about changes in owner’s equity is essential for owners and managers to make informed business decisions.

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