E2-1 Larry Burns has prepared the following list of statements about accounts.

1. An account is an accounting record of either a specific asset or a specific liability.

2. An account shows only increases, not decreases, in the item it relates to.

3. Some items, such as cash and accounts receivable, are combined into one account.

4. An account has a left, or credit side, and a right, or debit side.

5. A simple form of an account, consisting of just the account title, the left side, and the right side, is called a T-account.

Instructions

Identify each statement as true or false. If false, indicate how to correct the statement.

E2-2 Selected transactions for B. Madar SE, an interior decorating firm, in its first month of business, are shown below.

Jan. 2Invested 15,000 cash in the business in exchange for ordinary shares.

3Purchased used car for 7,000 cash for use in the business.

9Purchased supplies on account for 500.

111,800 of services were performed and billed.

16Paid 200 cash for advertising.

20Received 700 cash from customers billed on January 11.

23Paid creditor 300 cash on balance owed.

28Declared and paid a 1,000 cash dividend.