Asked by Tylour Smith on May 10, 2024
Verified
How does paying a liability in cash affect the accounting equation?
A) assets increase; liabilities decrease
B) assets increase; liabilities increase
C) assets decrease; liabilities decrease
D) liabilities decrease; owner's equity increases
Liability
Legal obligations related to finances that a business incurs throughout its operational processes.
Accounting Equation
The fundamental equation of double-entry bookkeeping: Assets = Liabilities + Owner's Equity.
Cash
Money in the form of currency that can include bills, coins, and balances in bank accounts that are readily available for use.
- Examine how cash transactions influence the accounting equation and financial statements.
Verified Answer
RM
Rawan MozayaMay 16, 2024
Final Answer :
C
Explanation :
Paying a liability in cash decreases assets (cash goes out) and decreases liabilities (the obligation is reduced or eliminated).
Learning Objectives
- Examine how cash transactions influence the accounting equation and financial statements.
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