The effect on the statement of financial position when the business pays a creditor is:
A) decrease asset creditor; decrease liability bank.
B) decrease asset bank; decrease liability creditor.
C) decrease asset bank; decrease equity.
D) none of the above.

Question

Quizplus · Accepted Answer

When the business pays a creditor, it decreases the liability to the creditor (which is decreased on the statement of financial position) and the asset in the form of cash or bank balance is also decreased. Thus, choice B is the correct answer as it reflects this change in the statement of financial position. The other choices do not reflect this change accurately.

The Effect on the Statement of Financial Position When the Business