Which item from Alliah's data is a liability?

Which item from Alliah's data is a liability?

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

Answer: (A)

Liabilities are obligations the business must settle in the future. Accounts Payable fits this definition because it represents amounts the business owes to suppliers for goods or services already received, and it will be paid off with cash or other assets. Inventory and cash are both assets—inventory is what the company owns to sell or use, and cash is the most liquid asset. Revenue is income earned from operations and increases equity, not a liability. Therefore, the item that is a liability is Accounts Payable.

Liabilities are obligations the business must settle in the future. Accounts Payable fits this definition because it represents amounts the business owes to suppliers for goods or services already received, and it will be paid off with cash or other assets. Inventory and cash are both assets—inventory is what the company owns to sell or use, and cash is the most liquid asset. Revenue is income earned from operations and increases equity, not a liability. Therefore, the item that is a liability is Accounts Payable.