Gomez Service Company paid its first installment on a note payable for an amount of $2,000. How will this transaction affect the accounting equation?
A) Increase Liabilities (Notes Payable) and decrease Assets (Cash)
B) Decrease Assets (Cash) and decrease Stockholders' Equity (Note Payable Expense)
C) Decrease Assets (Cash) and decrease Assets (Notes Receivable)
D) Decrease Assets (Cash) and decrease Liabilities (Notes Payable)

Question

Quizplus · Accepted Answer

Paying off a note payable decreases the cash asset and reduces the liability of notes payable.

Gomez Service Company Paid Its First Installment on a Note