Lonestar Company paid the amount due on a purchase of merchandise on account. Lonestar uses the perpetual inventory system. Which of the following answers reflects the effect of the payment on the financial statements?

Question

Quizplus · Accepted Answer

Payment of the amount due on account will decrease assets (cash) and decrease liabilities (accounts payable). It will not affect the income statement, but will be reported as a cash outflow for operating activities.

Lonestar Company Paid the Amount Due on a Purchase of Merchandise