Freed Company paid $500 cash for salary expenses. Which of the following choices accurately reflects how this event affects the company's financial statements?

Question

Quizplus · Accepted Answer

Paying cash for expenses decreases assets (cash) and decreases equity (retained earnings) on the balance sheet. It increases expenses which decreases net income on the income statement, and is shown as a cash outflow for operating activities on the statement of cash flows.

Freed Company Paid $500 Cash for Salary Expenses