The Payment of a Liability

question 72

Multiple Choice

The payment of a liability

• A) decreases assets and shareholders' equity.
• B) increases assets and decreases liabilities.
• C) decreases assets and increases liabilities.
• D) decreases assets and liabilities.

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Definitions:

Proprietorship

Proprietorship, also known as a sole proprietorship, is a business owned and operated by one individual, where there is no legal distinction between the owner and the business entity.

Personal Assets

Assets owned by an individual, including property, cash, and investments, that are not associated with any business activities.

Total Liabilities

The sum of all financial obligations or debts that a company has incurred and is responsible for repaying.

Owner's Equity

The residual interest in the assets of a company after deducting liabilities, representing the ownership stake of the company's shareholders or owner.