A contractor pays a supplier invoice of $6,800. What immediate effect does that payment have on cash?
Correct Answer
C) Cash decreases by $6,800.
Paying a supplier uses cash, so cash decreases by the amount paid.
Why This Is the Correct Answer
Paying a supplier uses cash, so cash decreases by the amount paid.
Why the Other Options Are Wrong
Option A: Cash increases by $6,800.
Cash increases by $6,800. is not aligned with the supported result for cash accounting; it has the wrong label or classification even if the number looks close.
Option B: Cash is unchanged.
Cash is unchanged. puts the item in the wrong financial bucket, timing, base, or comparison for cash accounting.
Option D: Cash becomes accounts receivable.
Cash becomes accounts receivable. puts the item in the wrong financial bucket, timing, base, or comparison for cash accounting.
Memory Technique
Paying and supplier live in different drawers; Updating Records tells which opens.
Reference Hint
Study anchor (closed-book): memorize Cash accounting from CSLB Law and Business Study Guide; CSLB 2026 Law Book / CSLB Law and Business Study Guide Business Finances; know the rule or calculation trigger without relying on exam-room lookup.
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