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In a journal entry, which account is debited when a company pays off a liability
In a journal entry, which account is debited when a company pays off a liability?
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Q1
In a journal entry, which account is debited when a company pays off a liability?
Cash
Liability
Expense
Asset
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When a company pays off a liability, the Cash account is credited, and the liability account is debited to reduce the obligation.
Questions & Step-by-step Solutions
1 item
Q
Q: In a journal entry, which account is debited when a company pays off a liability?
Solution:
When a company pays off a liability, the Cash account is credited, and the liability account is debited to reduce the obligation.
Steps: 5
Show Steps
Step 1: Identify the liability that the company is paying off, such as a loan or accounts payable.
Step 2: Understand that paying off a liability means the company is reducing what it owes.
Step 3: In accounting, to reduce a liability, you need to debit the liability account.
Step 4: Since the company is using cash to pay off the liability, you also need to credit the Cash account.
Step 5: The journal entry will show the liability account debited and the Cash account credited.
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