Gomez Service Company paid its first installment on a note 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 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

The payment of the note payable installment decreases the cash (asset) and reduces the liability (notes payable) as the company pays off part of its debt.

Gomez Service Company Paid Its First Installment on a Note