A Business Settles a Liability by Making a Payment in Cash

question 7

Multiple Choice

A business settles a liability by making a payment in cash. How does paying this liability affect the accounting equation of the business?

• A)Assets decrease; liabilities decrease.
• B)Liabilities decrease; equity increases.
• C)Assets increase; liabilities increase.
• D)Assets increase; equity decreases.

---

Definitions:

Ethical Relativism

The belief that morality is context-dependent and subjective, varying from one culture or individual to another.

Situational Ethics

An ethical theory that proposes the best ethical action is that which serves the particular circumstances, as opposed to following universal predetermined rules.

Central Authority

The main governing body or administrative organization that has the overarching control or oversight within a certain area or field.

Utilitarianism

An ethical theory that posits the greatest happiness of the greatest number should be the guiding principle of conduct.