Question

A payment of a business debt not including interest ________.

1) Decreases total assets
2) Increases total liabilities
3) Increases the owners' equity in the business
4) Decreases the owners' equity in the business

Answer 1

The correct answer is option 4. A payment of a business debt not including interest decreases the owners' equity in the business.

Step-by-step explanation:

The correct option is 4) Decreases the owners' equity in the business.

When a business makes a payment towards a debt, it reduces the amount owed and decreases the owners' equity in the business.

Owners' equity represents the portion of the company's assets that belongs to the owners or shareholders. As the debt is paid off, the owners' equity decreases because the company's assets are being used to settle the debt.