Question

Accounts payable is a ______ and increases when ______ and decreases when ______?

1) liability, goods or services are purchased on credit, payments are made to suppliers
2) asset, goods or services are purchased on credit, payments are made to suppliers
3) liability, payments are made to suppliers, goods or services are purchased on credit
4) asset, payments are made to suppliers, goods or services are purchased on credit

Answer 1

Accounts payable is a liability that increases when purchases are made on credit and decreases when payments are made to suppliers. The correct answer is option 1.

Step-by-step explanation:

Accounts payable is a liability, and it increases when goods or services are purchased on credit, and decreases when payments are made to suppliers. Therefore, the correct answer to the student's question is option 1) liability, goods or services are purchased on credit, payments are made to suppliers. A liability is something a company owes, typically a sum of money. On a balance sheet, an organization's assets, liabilities, and net worth are listed to provide an overview of its financial position. A liability like accounts payable reflects money that the business owes to its creditors or suppliers.