Gomez Service Company paid their first installment on their Notes Payable in the 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 Owner's 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

The payment of the installment decreases the cash (asset) and also decreases the notes payable (liability) as the company is paying off part of its debt.

Gomez Service Company Paid Their First Installment on Their Notes