Question

A payment of a portion of an accounts payable will:_______A) decrease net income. B) not affect stockholders' equity. C) not affect total assets. D) increase liabilities.

Answer 1

Answer: B) not affect stockholders' equity.

Explanation:

When an accounts payable is paid off, this represents a reduction in liabilities as well as a reduction in assets ( the cash used to pay). The company's equity will not be affected in any way.

This is proven by the accounting equation which shows that assets are equal to equity plus liabilities. If both liabilities and assets reduce by the same amount, the equity will have to remain unaffected for the formula to stand.