Final answer:
The statement is true. Increases in a company's assets or decreases in its liabilities and equity usually result in cash outflows, as demonstrated in T-account examples, especially in banking where customer deposits are considered liabilities.
Step-by-step explanation:
The statement "Cash outflows result from increases in asset accounts and decreases in liability and equity accounts" is true. In the context of a T-account, which represents a simplified version of a company's balance sheet, increases in assets imply that the company is using cash to purchase assets, which is a cash outflow. Conversely, decreases in liabilities or equity suggest that a company is reducing what it owes or is distributing its earnings, respectively, which also leads to cash outflows.
For a banking example, when bank customers deposit money, the bank records these deposits as liabilities, because it owes the deposited funds to the customers. If a bank's deposits (liabilities) decrease, it means that customers are withdrawing money, resulting in a cash outflow for the bank. Similarly, if a bank acquires more assets, like U.S. treasury bonds or issues more loans, it is effectively exchanging cash for those assets, generating a cash outflow. The net transaction affects the bank's net worth, which is the difference between total assets and total liabilities.
In summary, understanding the relationship between assets, liabilities, equity, and cash flow is crucial for managing a firm's finances. An increase in assets or a decrease in liabilities and equity usually requires a cash outpayment, thus a cash outflow occurs.