Question

Decrease in the amount of creditors results in a ________.

• A. increase in cash
• B. decrease in cash
• C. increase in liabilities
• D. no change in assets

Answer 1

The correct option is B decrease in cash

Double entry system of accounting says that for every debit there will be a credit. Hence if any amount paid to a creditor will decrease the amount of creditor and on other side, cash will also be decreased.

Accounting entry will be as under:

Creditors A/c Dr.

To Cash A/c