What does accounts payable represent?

What does accounts payable represent?

• A. Amounts owed to suppliers for goods or services received
• B. Cash available for immediate use
• C. Amounts owed by the company to its employees
• D. Inventory that is yet to be sold

Answer: (A)

Accounts payable specifically refers to the liabilities that a business has incurred from purchasing goods or services on credit. This represents amounts owed to suppliers or vendors for materials, products, or services that the company has received but has not yet paid for. It is a key component of a company's short-term liabilities and plays an important role in the company's operational cash flow management. In contrast, the other choices do not accurately describe accounts payable. Cash available for immediate use relates to liquid assets rather than liabilities. Amounts owed to employees concern payroll and wages, typically classified under accrued liabilities or wages payable, rather than accounts payable. Lastly, inventory that has yet to be sold involves asset management rather than liability management, as it represents goods that the company possesses but has not yet sold, rather than obligations to pay suppliers.

Accounts payable specifically refers to the liabilities that a business has incurred from purchasing goods or services on credit. This represents amounts owed to suppliers or vendors for materials, products, or services that the company has received but has not yet paid for. It is a key component of a company's short-term liabilities and plays an important role in the company's operational cash flow management.

In contrast, the other choices do not accurately describe accounts payable. Cash available for immediate use relates to liquid assets rather than liabilities. Amounts owed to employees concern payroll and wages, typically classified under accrued liabilities or wages payable, rather than accounts payable. Lastly, inventory that has yet to be sold involves asset management rather than liability management, as it represents goods that the company possesses but has not yet sold, rather than obligations to pay suppliers.