The effect of the payment of liability is that it decreases liabilities and decreases assets. When a liability is paid, it means that the company has reduced its obligation to pay back its debts or outstanding expenses. As a result, the liability account is decreased. The payment is usually made using an asset such as cash, which also decreases the amount of assets the company has. Therefore, paying a liability has the effect of decreasing both the liabilities and assets of a company.