In transactions involving the borrowing or lending of money, as interest is paid, the balance in the liability account of the borrower
A)decreases.
B)increases.
C)remains unchanged.
D)is transferred to interest income

Question

Quizplus · Accepted Answer

As interest is paid, the borrower's liability account decreases because the borrower is reducing the amount of money they owe to the lender. Therefore, choice A is the correct answer. The balance in the liability account does not transfer to interest income as that pertains to the lender's account, not the borrower's.

In Transactions Involving the Borrowing or Lending of Money, as Interest