A Business Paid $7,000 to a Creditor in Payment of an Amount

question 87

Multiple Choice

A business paid $7,000 to a creditor in payment of an amount owed. The effect of the transaction on the accounting equation was to

• A) increase one asset, decrease another asset
• B) decrease an asset, decrease a liability
• C) increase an asset, increase a liability
• D) increase an asset, increase owner's equity

---

Definitions:

Internal Users

Individuals within an organization who use financial information to make decisions, including managers, employees, and internal auditors.

Financial Information

Data regarding the financial status, operations, and cash flows of a business, useful for decision-making purposes.

Operating Efficiency

A measure of how well a company utilizes its resources to generate profits, often indicated by the ratio of output produced to input used.

Capital Structure

The mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity, which is used to finance its overall operations and growth.