A company receives an utility bill and immediately pays it.With this transaction:
A)stockholders' equity is decreased.
B)expenses are decreased.
C)assets are increased.
D)liabilities are increased.

Question

Quizplus · Accepted Answer

When a company pays a utility bill, it is using its assets (typically cash) to settle a liability (the bill). This decreases the company's assets and also decreases its stockholders' equity because expenses (like utility bills) reduce the net income, which in turn reduces retained earnings, a component of stockholders' equity. Expenses are not decreased by paying the bill; they are recognized when the utility is used, not when the bill is paid. Assets are decreased, not increased, and liabilities are not increased but settled/decreased by the payment.

A Company Receives an Utility Bill and Immediately Pays It