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,liabilities would decrease $38,000,and equity remains unchanged.
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.

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Jasmin Bien-aime · Accepted Answer

Final Answer : C, Explanation :  When a company pays its accounts payable in cash, both the asset (cash) and the liability (accounts payable) decrease by the same amount. This has no effect on equity since equity represents the difference between assets and liabilities. Therefore, the accounting equation remains balanced and unchanged.

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