Question

1) Which of the following groups of accounts must begin each accounting period with a zero balance?

            a. Dividends, sales rev, Cash

            b. rent expense, U/R, divs

            c. prepaid rent, sales rev

            d. Dividends, rent expense, sales Rev

            e. Accounts receivable, Divs, rent expense

2) Which of the following statements about expenses in TRUE?

            -Expenses may INC (increase) Assets and DEC equity

            -Expenses may INC liabilities and DEC equity

            -Expenses may INC assets and INC equity

            -Expenses may INC liabilities and INC equity

Answer 1

1) d. Dividends, rent expense, sales Rev (answer)

Explanation:- Temporary accounts, also referred to as nominal accounts or income statement accounts, start each accounting period with a balance of zero. These accounts cover categories like revenue and expenses, both of which are numbers found on the income statement.

All the 3 items are from income statement and so will have zero balance at beginning of each accounting period

2) Expenses may INC liabilities and DEC equity (answer)

Explanation:- When expenses are accrued, this means that an accrued liabilities account is increased, while the amount of the expense reduces the retained earnings account. Thus, the liability portion of the balance sheet increases, while the equity portion declines.