A Business Settles a Liability by Making a Payment with Cash.How

question 45

Multiple Choice

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

• A) Assets decrease; liabilities decrease.
• B) Liabilities decrease; owner's equity increases.
• C) Assets increase; liabilities increase.
• D) Assets increase; liabilities decrease.

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Definitions:

Common Stock Account

An equity account that represents the ownership interests of common shareholders in a company.

Stated Value

A value assigned to a company's no-par value stock by the company’s board of directors.

Shares

Shares represent an ownership stake in a company or financial asset, distributing profits equally through dividends if any are declared.

Earnings Per Share

A measure of a company's profitability calculated as net income divided by the number of outstanding shares of its common stock.