What is the impact on the accounting equation of recording a payment to a supplier on account?
A)Both assets and liabilities decrease.
B)Both assets and stockholders' equity decrease.
C)Liabilities decrease and stockholders' equity increases.
D)Liabilities increase and stockholders' equity decreases.

Question

Quizplus · Accepted Answer

When a payment is made to a supplier on account, the company's cash (an asset) decreases because they are paying out money. At the same time, the company's accounts payable (a liability) also decreases because they are reducing the amount they owe to the supplier. This results in both assets and liabilities decreasing, with no direct effect on stockholders' equity in this transaction.

What Is the Impact on the Accounting Equation of Recording