Which statement best explains accounts payable?

Which statement best explains accounts payable?

• A. Money the business owes to suppliers for purchases on credit
• B. Money owed to customers for goods sold
• C. An asset representing future cash receipts
• D. A long-term loan payable to banks

Answer: (A)

Accounts payable are the amounts a business owes to its suppliers for purchases made on credit. They represent obligations that the company must settle in the near term, so they appear as current liabilities on the balance sheet. This concept distinguishes payable obligations to vendors from money the business is owed by others. For example, what the business expects to receive from customers is accounts receivable, an asset, not a liability. A long‑term loan payable to banks is also a liability, but it is a loan rather than accounts payable and is typically classified separately from vendor payables, often as a long‑term or note payable depending on its maturity.

Accounts payable are the amounts a business owes to its suppliers for purchases made on credit. They represent obligations that the company must settle in the near term, so they appear as current liabilities on the balance sheet. This concept distinguishes payable obligations to vendors from money the business is owed by others. For example, what the business expects to receive from customers is accounts receivable, an asset, not a liability. A long‑term loan payable to banks is also a liability, but it is a loan rather than accounts payable and is typically classified separately from vendor payables, often as a long‑term or note payable depending on its maturity.