Question

Activities that increase cash are called sources of cash. Those activities that decrease cash are called uses of cash. Sources of cash always involve increasing a liability (or equity) account or decreasing an asset account. a.True b.False

Answer 1

While sources of cash typically involve increasing liabilities or decreasing assets, there are exceptions such as selling an asset for more than its book value, which results in a gain. Thus, the statement is false.

Step-by-step explanation:

Activities that increase cash are indeed called sources of cash, and activities that decrease cash are called uses of cash. However, the statement that sources of cash always involve increasing a liability (or equity) account or decreasing an asset account is not entirely accurate. For example, selling an asset for more than its book value would increase both an asset account (cash) and equity (through gains), but it wouldn't involve increasing a liability or decreasing another asset. Therefore, the correct answer to the question is b. False.