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In a journal entry, which account is debited when a company pays off a liability

Practice Questions

Q1
In a journal entry, which account is debited when a company pays off a liability?
  1. Cash
  2. Liability
  3. Expense
  4. Asset

Questions & Step-by-Step Solutions

In a journal entry, which account is debited when a company pays off a liability?
  • 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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