Saddleback Company paid off $30,000 of its accounts payable in cash.What would be the effects of this transaction on the accounting equation?

A) Assets,$30,000 increase; equity,$30,000 increase.
B) Assets,$30,000 decrease; liabilities,$30,000 decrease.
C) Assets,$30,000 decrease; liabilities,$30,000 increase.
D) Liabilities,$30,000 decrease; equity,$30,000 increase.
E) Assets,$30,000 decrease; equity $30,000 decrease.

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Tyler Bovan · Accepted Answer

Final Answer : B, Explanation :  Paying off accounts payable reduces a liability, so the liabilities would decrease by $30,000. Since the payment was made in cash, the assets would also decrease by $30,000 to reflect the decrease in cash. This transaction does not affect equity. Therefore, assets would decrease by $30,000 and liabilities would also decrease by $30,000, as per the accounting equation.

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