The company pays off the credit card bill. This transaction impacts the accounts payable and the cash accounts. In your journal entry, which account do you credit?

The company pays off the credit card bill. This transaction impacts the accounts payable and the cash accounts. In your journal entry, which account do you credit?

• A. Accounts payable
• B. Cash account
• C. Office supplies
• D. Interest expense

Answer: (B)

When you pay a bill that was recorded as a liability, you are reducing what you owe and also reducing your cash on hand. In double-entry accounting, you debit the liability account (Accounts Payable) to decrease it, and you credit the cash account to reflect the cash leaving the business. Since paying the bill lowers cash, the entry credits the Cash account. The other options don’t fit: Office supplies wouldn’t be affected by paying a credit card bill, and interest expense would only appear if there was interest involved in the payment.

When you pay a bill that was recorded as a liability, you are reducing what you owe and also reducing your cash on hand. In double-entry accounting, you debit the liability account (Accounts Payable) to decrease it, and you credit the cash account to reflect the cash leaving the business. Since paying the bill lowers cash, the entry credits the Cash account. The other options don’t fit: Office supplies wouldn’t be affected by paying a credit card bill, and interest expense would only appear if there was interest involved in the payment.