Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

9. Current Liabilities

Types of Liabilities

Financial Accounting

9. Current Liabilities

Types of Liabilities

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

When a business pays cash on account, a liability account is:

unchanged

decreased

closed

increased

Previous problemNext problem

Verified step by step guidance

Understand the concept of 'paying cash on account': This refers to a business settling part or all of its outstanding liabilities (accounts payable) by paying cash to the creditor.

Recall the accounting principle: When a liability is paid off, the liability account decreases because the obligation to pay is reduced.

Analyze the transaction: Paying cash reduces the cash account (an asset) and simultaneously decreases the liability account (accounts payable). This is recorded as a debit to the liability account and a credit to the cash account.

Consider the options provided: 'Unchanged' is incorrect because the liability is reduced. 'Closed' is incorrect because the account is not being closed, just decreased. 'Increased' is incorrect because the liability is being paid down, not added to.

Conclude that the correct answer is 'decreased' because paying cash on account reduces the liability account balance.