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When two asset accounts are changed, must one be an increase and the other a decrease.

1) True
2) False

User Farzam
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1 Answer

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Final answer:

The statement "When two asset accounts are changed, must one be an increase and the other a decrease" is False. This depends on the transactions a business engages in, as both accounts can increase or decrease simultaneously under certain circumstances. Option 1.

Step-by-step explanation:

When considering changes in two asset accounts, it's not necessarily true that one must always show an increase and the other a decrease.

In some scenarios, both asset accounts might increase or decrease, depending on the nature of the transactions.

For example, if a business sells a product for cash, its cash account (an asset) increases, while its inventory account (also an asset) decreases.

However, if a business obtains a loan and receives cash, both its cash account and loan account (a liability, but could include an asset such as a loan receivable if considering a bank's perspective) would increase.

This is explained by the concept that a bank's T-account must always have assets equal to liabilities plus net worth; any change in an asset or liability must be balanced by a corresponding change in another account.

The initial question, "When two asset accounts are changed, must one be an increase and the other a decrease?" is therefore False, as changes are dependent on the specific transactions that occur within a business.

Hence, the statement is False. Option 1.

User Fad
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