Question

If an expense is paid with cash assets will decrease. retained earnings will increase. liabilities will increase. expenses will decrease.

Answer 1

If an expense is paid with cash the assets will decrease.

Explanation:

• As long as cash is termed as a current asset, its flowing out of the business would be considered as a decrease in the assets.
• Though it is a conventional practice to pay for expenses in cash, it has to be taken into consideration that the assets of the business are decreasing with such payments done.
• But as cash is a highly fluid asset, its inflow and outflow do not bother the business much.