The payment of a liability causes an increase in equity.

Name: The payment of a liability causes an increase in equity.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The payment of a liability reduces the amount of the liability owed, but does not directly impact equity. It may indirectly impact equity if the liability was used to purchase assets which generate income or if the payment of the liability reduces interest expenses, thereby increasing net income and retained earnings.

The Payment of a Liability Causes an Increase in Equity