Question

Which of the following statement is always correct:

	a.	If a transaction decreases net income, it will decrease total assets on the balance sheet.
	b.	If a transaction increases net income, it will increase retained earnings on the balance sheet.
	c.	If a transaction increases revenue, it will increase total assets on the balance sheet.
	d.	If a transaction increases expenses, it will have no effect on the balance sheet.

Answer 1

Correct answer-------------If a transaction increases net income, it will increase retained earnings on the balance sheet

.

If a transaction increases revenue, it may not affect asset account because the revenue could be adjusted with an advance from customer. If a transaction decreases net income, it will decrease equity but may not have any effect on assets.