A business paid $7,000 to a creditor in payment of an amount owed. The effect of the transaction on the accounting equation was to
A) increase an asset, decrease another asset
B) decrease an asset, decrease a liability
C) increase an asset, increase a liability
D) increase an asset, increase owner's equity

Question

Quizplus · Accepted Answer

When the business paid $7,000 to a creditor, it decreased an asset (cash) and decreased a liability (accounts payable). This has no effect on owner's equity and does not involve an increase in any assets or liabilities.

A Business Paid $7,000 to a Creditor in Payment of an Amount