Which of the following is a liability that would appear on the balance sheet?

Which of the following is a liability that would appear on the balance sheet?

• A. Accounts Payable
• B. Accounts Receivable
• C. Inventory
• D. Cash

Answer: (A)

Liabilities on the balance sheet are obligations to pay cash or provide goods or services in the future. Accounts payable fits this because it records amounts you owe to suppliers for purchases made on credit. It’s a current liability that will typically be settled within a short period. When you buy on credit, you increase inventory (an asset) and create accounts payable (a liability); when you pay, you decrease accounts payable and cash. The other items listed are assets—accounts receivable is what customers owe you, inventory is what you own, and cash is liquid assets. So accounts payable is the liability that would appear on the balance sheet.

Liabilities on the balance sheet are obligations to pay cash or provide goods or services in the future. Accounts payable fits this because it records amounts you owe to suppliers for purchases made on credit. It’s a current liability that will typically be settled within a short period. When you buy on credit, you increase inventory (an asset) and create accounts payable (a liability); when you pay, you decrease accounts payable and cash. The other items listed are assets—accounts receivable is what customers owe you, inventory is what you own, and cash is liquid assets. So accounts payable is the liability that would appear on the balance sheet.