A business paid $7,000 to a creditor in payment of an amount owed. The effect of the transaction on the accounting equation was to

A) increase an asset, decrease another asset
B) decrease an asset, decrease a liability
C) increase an asset, increase a liability
D) increase an asset, increase stockholders' equity

Accounting Equation

A fundamental principle representing the relationship between an entity's assets, liabilities, and equity; Assets = Liabilities + Equity.

Creditor

An entity or person that lends money or extends credit to another party, expecting to be repaid in the future.

Liability

A financial obligation or debt owed by a company to another entity, payable in the form of money, services, or goods, recorded on the right-hand side of the balance sheet.