CA Foundation Exam > CA Foundation Questions > Reducing the creditors results in -a) ...
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Reducing the creditors results in -
- a)Increase in cash
- b)Decrease in cash
- c)Increase in assets
- d)No change in assets
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
Reducing the creditors results in -a) ...
Explanation:
When a company reduces its creditors, it means that it has paid off some of its outstanding debts. This will have an impact on the company's cash position.
Decrease in Liabilities
When creditors are reduced, the company's liabilities decrease. This means that the company owes less money to its creditors.
Decrease in Cash
When the company pays off its creditors, it will have to use cash to do so. This will result in a decrease in the company's cash position.
Impact on Financial Statements
The reduction in creditors will have an impact on the company's financial statements. The balance sheet will show a decrease in liabilities and a decrease in cash. The income statement will not be affected by this change.
Conclusion:
Therefore, the correct answer is option 'B' - Decrease in cash.
When a company reduces its creditors, it means that it has paid off some of its outstanding debts. This will have an impact on the company's cash position.
Decrease in Liabilities
When creditors are reduced, the company's liabilities decrease. This means that the company owes less money to its creditors.
Decrease in Cash
When the company pays off its creditors, it will have to use cash to do so. This will result in a decrease in the company's cash position.
Impact on Financial Statements
The reduction in creditors will have an impact on the company's financial statements. The balance sheet will show a decrease in liabilities and a decrease in cash. The income statement will not be affected by this change.
Conclusion:
Therefore, the correct answer is option 'B' - Decrease in cash.
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Community Answer
Reducing the creditors results in -a) ...
Wkt.creditors is liability
in order to reduce creditors,we need to pay them.
which reduces cash balance
in order to reduce creditors,we need to pay them.
which reduces cash balance
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Reducing the creditors results in -a) Increase in cash b) Decrease in cash c) Increase in assets d) No change in assets Correct answer is option 'B'. Can you explain this answer?
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Reducing the creditors results in -a) Increase in cash b) Decrease in cash c) Increase in assets d) No change in assets Correct answer is option 'B'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Reducing the creditors results in -a) Increase in cash b) Decrease in cash c) Increase in assets d) No change in assets Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Reducing the creditors results in -a) Increase in cash b) Decrease in cash c) Increase in assets d) No change in assets Correct answer is option 'B'. Can you explain this answer?.
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