Question

Question content area a check drawn by a company for $340 in payment of a liability was recorded in the journal as $430. what entry is required in the company's accounts?

Answer 1

A check given by a company for $340 in payment of liability was  in the diary as $430. This item to be included on the bank as an addition to the balance per the firm's records.

What are payment liabilities?

Payment Liabilities means all Penalties other than

(i) contingent obligations of Borrower regarding which neither Agent nor any Lender has asserted a claim against Borrower, and

(ii) non-monetary commitments of performance; provided, that Payment Liabilities shall include the Letter of Credit Responsibilities

The payment of a liability reduces assets and liabilities as the liability could be paid only through paying cash or cash equivalents hence it reduces the asset when the liability is paid off then it is decreased.

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