A business paid $7,000 to a creditor in payment of an amount owed. The effect of the transaction on the accounting equation was to

A) increase an asset, decrease another asset
B) decrease an asset, decrease a liability
C) increase an asset, increase a liability
D) increase an asset, increase owner's equity

Accounting Equation

The fundamental equation representing the relationship among assets, liabilities, and owner's equity: Assets = Liabilities + Owner’s Equity.

Creditor

An individual or entity that is owed money by another party, often in the context of loaning funds or issuing credit.

Liability

The financial liabilities or obligations a company is legally bound to settle, which emerge in the process of conducting its business activities.