When a business uses cash to pay for supplies ordered on credit, what happens to the accounts on the balance sheet?

When a business uses cash to pay for supplies that were previously ordered on credit, this transaction directly affects the balance sheet in the following ways:

The cash account will decrease because the business is using its cash resources to settle the payment. This reflects a reduction in available cash, as the business is disbursing funds.

Simultaneously, accounts payable will decrease since the payment settles a liability that was recorded when the supplies were originally ordered. Accounts payable represents money owed to suppliers for purchases made on credit, so when the business pays off this liability, it diminishes the accounts payable balance.

In summary, the decrease in the cash account shows the use of cash resources, while the decrease in accounts payable indicates that the business has fulfilled part of its obligation to its supplier. This transaction effectively clears the liability associated with the purchase, reflecting good financial management by ensuring that debts are paid in a timely manner.