What transaction would cause a decrease in a liability and a increase in a liability?

Answer:This would be where one type of liability is exchanged for another liability.

Example

The firm has Accounts Payable that are due. Since they are short of cash, the firm agrees with one supplier that the firm receives an extention of 2 months, with 5% annual interest.

The invoice now needs to be categorized as a note payable. As a result accounts payable is reduced and notes payable increase.