Venus,Inc.paid $5,000 on accounts payable.How does this transaction affect the accounting equation of Venus?
A)assets decrease by $5,000 and equity increases by $5,000
B)assets decrease by $5,000 and liabilities decrease by $5,000
C)assets increase by $5,000 and equity decreases by $5,000
D)assets increase by $5,000 and liabilities increase by $5,000

Question

Quizplus · Accepted Answer

When Venus, Inc. paid $5,000 on accounts payable, its liabilities decreased by $5,000 as the company settled its debt with the creditor. As a result, the accounting equation will be affected by decreasing both assets and liabilities by $5,000. This is because assets will decrease as a result of using them to settle the payable, while liabilities decrease as the payable is settled. Therefore, option B is the correct answer.

Venus,IncPaid $5,000 on Accounts Payable