If a business pays $1,100 on account to a creditor, the effect of the payment is a decrease to cash and a(n):
A)decrease to Fees Income.
B)decrease to accounts payable.
C)increase to accounts receivable.
D)increase of capital.

Question

Quizplus · Accepted Answer

When a business pays $1,100 on account to a creditor, it means that they are reducing their accounts payable (the debt they owe to the creditor). Therefore, the effect of the payment is a decrease to cash (because cash is leaving the business) and a decrease to accounts payable. The other options are not relevant to this transaction.

If a Business Pays $1,100 on Account to a Creditor