Question

true/false

1. If total assets are increased, there must be a corresponding increase in liabilities or a decrease in stockholders’ equity.

2. If an expense account is credited, the expense account is increased.

3.The normal balance of an asset is a credit.

Answer 1

1)False

Explanation:

Accounting equation is Assets=Liabilities + Capital(Stockholders' Equity). If total assets are increased then there must be corresponding increase in either Liabilities or stockholders' equity to make the accounting equation balanced. There cannot be the situation of increase in total assets and decrease in stockholders' equity, otherwise equlation will not be balanced.

2)False

Explanation:

Expense accounts increase on debit and not on credit as the rule for nominal account says debit all expenses and credit all gains.

3)False

Explanation:

Normal balance of asset account is debit because assets increase on debit and reduce on credit (rule for real account debit what comes in, credit what goes out).

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