Final answer:
The claim that transactions with 'on account' only affect expense and liability accounts is false; such transactions impact various account types, including assets, revenue, and equity, as represented in T-accounts.
Step-by-step explanation:
The statement that transactions including the phrase "on account" will only impact expense and liability accounts is false. When a transaction is said to be done "on account," it typically involves a credit transaction that can affect various types of accounts, not just expenses and liabilities. For example, purchasing inventory "on account" will increase the inventory account (an asset) and simultaneously increase accounts payable (a liability). Similarly, selling goods "on account" will increase accounts receivable (an asset) and sales revenue (an equity account). Therefore, the phrase "on account" can impact not only expense and liability accounts but also assets, revenue, and equity accounts.
In the context of T-accounts, the "T" helps to represent the financial position of a firm by separating the assets on the left from its liabilities and net worth (or owner's equity) on the right. It is crucial to understand that a T-account balance to zero, meaning that the total assets must always equal the sum of liabilities plus net worth. This principle is part of the fundamental accounting equation: Assets = Liabilities + Owner's Equity. Transactions "on account" are reflected in T-accounts and impact the balance of the related accounts based on this equation.