If a company paid $38,000 of its accounts payable in cash,what was the effect on the accounting equation?
A)Assets would decrease $38,000,liabilities would decrease $38,000,and equity would decrease $38,000.
B)Assets would decrease $38,000,liabilities would decrease $38,000,and equity would increase $38,000.
C)Assets would decrease $38,000 and liabilities would decrease $38,000.
D)There would be no effect on the accounts because the accounts are affected by the same amount.
E)Assets would increase $38,000 and liabilities would decrease $38,000.

Question

Quizplus · Accepted Answer

When a company pays off its accounts payable in cash, both assets and liabilities decrease by the same amount. The cash payment reduces the asset Cash, while the reduction in accounts payable decreases the liability Accounts Payable. There is no effect on equity since both assets and liabilities decreased equally. Therefore, option C is the correct answer.

If a Company Paid $38,000 of Its Accounts Payable in Cash,what