Payment is made for machinery purchased previously on credit. What effect does this transaction have on the accounting equation?

Question

Quizplus · Accepted Answer

When payment is made for machinery purchased previously on credit, it will result in a decrease of the company's assets in the form of cash and a decrease in liabilities as the company is effectively paying off a debt. Therefore, the accounting equation will be affected as follows:
Assets - decrease (due to payment made for machinery)
Liabilities - decrease (due to payment made for previously purchased machinery)
Equity - no effect.

Payment Is Made for Machinery Purchased Previously on Credit