Accounts Payable is an example of which type of account?

Accounts Payable is an example of which type of account?

• A. A liability account.
• B. An asset account.
• C. A revenue account.
• D. An equity account.

Answer: (C)

Accounts payable is a liability because it tracks obligations to pay suppliers in the future. It arises when you buy goods or services on credit, creating a debt your business must settle. As a liability, it sits on the balance sheet and typically has a normal credit balance, increasing when you incur the obligation and decreasing when you pay it off. This is distinct from asset accounts (like cash or inventory), which represent resources the business owns; revenue accounts, which reflect earned income and affect equity; and equity accounts, which represent the owners’ claims. So, the correct type for accounts payable is a liability account.

Accounts payable is a liability because it tracks obligations to pay suppliers in the future. It arises when you buy goods or services on credit, creating a debt your business must settle. As a liability, it sits on the balance sheet and typically has a normal credit balance, increasing when you incur the obligation and decreasing when you pay it off. This is distinct from asset accounts (like cash or inventory), which represent resources the business owns; revenue accounts, which reflect earned income and affect equity; and equity accounts, which represent the owners’ claims. So, the correct type for accounts payable is a liability account.