If revenue exceeds expenses, there will always be an increase in equity. If a company paid its phone bill using cash, one of the accounts affected would be liabilities.

Here are the answers to your questions:

Question 4:
While revenue exceeding expenses (net income) generally increases equity, owner's drawings also reduce equity. If the owner's drawings for the period are greater than the net income, the overall equity could decrease or remain unchanged. Therefore, it will not always be an increase.

• False

Question 5:
When a company pays its phone bill using cash, the Cash account (an asset) decreases. If the phone bill was previously received and recorded as an Accounts Payable (which is a liability), then paying it would reduce that liability. Therefore, a liability account can indeed be one of the accounts affected.

• True