Question

A transaction that decreases a liability and increases an asset must also affect one or more other accounts.

a-true
b-false

Answer 1

False, A transaction that decreases a liability and increases an asset must also affect another account.

Step-by-step explanation:

The statement is true. When a transaction decreases a liability and increases an asset, it must also affect another account.

This is because every transaction in accounting follows the double-entry system, which requires that every debit (increase) in one account must be accompanied by a corresponding credit (decrease) in another account to maintain the balance of the accounting equation.

For example, if a company pays off a loan (decrease in liability) by transferring cash (increase in asset) from its bank account, the transaction would also affect the cash account by decreasing the cash balance.

Therefore, a transaction that decreases a liability and increases an asset will impact at least two accounts to maintain the equality of the accounting equation: assets = liabilities + equity.