A business settles a liability by making a payment with cash.How does paying this liability affect the accounting equation?
A) Assets decrease; liabilities decrease.
B) Liabilities decrease; owner's equity increases.
C) Assets increase; liabilities increase.
D) Assets increase; liabilities decrease.

Question

Quizplus · Accepted Answer

When a business pays off a liability with cash, its assets (cash) decrease because money is going out, and its liabilities decrease because the business is settling a debt it owed.

A Business Settles a Liability by Making a Payment with Cash.How