Saturn Company paid $10,000 on accounts payable.How does this transaction affect the accounting equation of Saturn?
A) assets decrease by $10,000 and equity increases by $10,000
B) assets decrease by $10,000 and liabilities decrease by $10,000
C) assets increase by $10,000 and equity decreases by $10,000
D) assets increase by $10,000 and liabilities increase by $10,000

Question

Quizplus · Accepted Answer

The payment of accounts payable is a reduction in liabilities. Therefore, assets decrease by $10,000 (as cash is used to make the payment) and liabilities decrease by $10,000, leaving equity unaffected.

Saturn Company Paid $10,000 on Accounts Payable