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Decrease in the amount of 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
Decrease in the amount of creditors results ina)Increase in cash.b)Dec...
Explanation:
When there is a decrease in the amount of creditors, it means that the company has paid off some of its debts to the creditors. This will result in a decrease in the amount of cash because the company has used its cash to pay off the debts. The following points explain this in more detail:
• Creditors are liabilities: Creditors are the people or organizations to whom the company owes money. They are considered as liabilities in the balance sheet.
• Decrease in creditors means decrease in liabilities: When the company pays off some of its debts to the creditors, the amount of liabilities decreases.
• Decrease in liabilities means decrease in cash: When the amount of liabilities decreases, it means that the company has used its cash to pay off the debts. Hence, there will be a decrease in the amount of cash.
• No change in assets: The decrease in cash will be offset by the decrease in liabilities, so there will be no change in the total assets of the company.
Therefore, the correct answer is option B, which states that a decrease in the amount of creditors results in a decrease in cash.
When there is a decrease in the amount of creditors, it means that the company has paid off some of its debts to the creditors. This will result in a decrease in the amount of cash because the company has used its cash to pay off the debts. The following points explain this in more detail:
• Creditors are liabilities: Creditors are the people or organizations to whom the company owes money. They are considered as liabilities in the balance sheet.
• Decrease in creditors means decrease in liabilities: When the company pays off some of its debts to the creditors, the amount of liabilities decreases.
• Decrease in liabilities means decrease in cash: When the amount of liabilities decreases, it means that the company has used its cash to pay off the debts. Hence, there will be a decrease in the amount of cash.
• No change in assets: The decrease in cash will be offset by the decrease in liabilities, so there will be no change in the total assets of the company.
Therefore, the correct answer is option B, which states that a decrease in the amount of creditors results in a decrease in cash.
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Decrease in the amount of creditors results ina)Increase in cash.b)Dec...
When we pay off the cash to our creditors then the amount of creditors in our books will be reduced. So by paying cash to creditors the amount of cash balance in our books reduces. The journal entry will be cash account Dr to creditors account and hence there will be a decrease in cash and option B is the correct answer
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Decrease in the amount of creditors results ina)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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