Question

The paying of an expense reduces

a. stockholders’ equity.
b. the amount owed on a liability.
c. accounts receivable.
d. accounts payable.

Answer 1

The payment of an expense reduces stockholders' equity as it increases expenses on the income statement, decreasing net income and therefore retained earnings which are a part of stockholders' equity.

Step-by-step explanation:

The payment of an expense reduces stockholders' equity. When a corporation pays for an expense, it records the transaction by increasing expenses on the income statement, which decreases net income. Since net income is a component of retained earnings, and retained earnings are part of stockholders' equity, paying an expense ultimately reduces equity.

This transaction does not affect the amount owed on a liability, accounts receivable, or accounts payable directly, unless the expense paid is specifically related to one of those accounts.