If a company is paid $20,000 on accounts receivable and uses the money to pay $20,000 on accounts payable then:
A)assets would increase by $20,000 while liabilities would decrease by $20,000.
B)liabilities would decrease by $20,000 while shareholders' equity would increase by $20,000.
C)Both assets and liabilities would decrease by $20,000.
D)Both assets and shareholders' equity would decrease by $20,000.

Question

Quizplus · Accepted Answer

When a company uses $20,000 received from accounts receivable to pay off $20,000 in accounts payable, its assets decrease by $20,000 due to the reduction in accounts receivable or cash, and its liabilities decrease by $20,000 due to the reduction in accounts payable. There's no net change in shareholders' equity.

If a Company Is Paid $20,000 on Accounts Receivable and Uses