Question

when a company repays a $500 loan payable, the effect on the balance sheet equation is:

a) to decrease total assets

b) to decrease total liabilities

c) to decrease owners' equity

d) both a and b are correct

Answer 1

Correct answer-------(d) both a and b are correct.

.

When loan payable is paid off cash decrease and loan payable derease hence both total asset and total liability decrease. There will be no effect on equity.