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An obligation to pay a supplier within 30 days should be recorded in ________, whereas a signed promise to pay cash at some point in the future should be recorded as ________.

1) payable
2) receivable
3) inventory
4) cash
5) liability

User Locka
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1 Answer

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Final answer:

An obligation to pay a supplier within 30 days is recorded as an accounts payable, and a signed promise for future cash payment is recorded as a note payable or long-term liability.

Step-by-step explanation:

An obligation to pay a supplier within 30 days should be recorded in accounts payable, whereas a signed promise to pay cash at some point in the future should be recorded as a note payable or long-term liability.

When a business engages in transactions with its suppliers, they agree upon payment terms that often allow a period within which to make payments for goods or services received. If the payment is expected to be made within a short timeframe, typically less than one year, it is considered a short-term liability and is recorded as accounts payable. On the other hand, if a business makes a formal agreement to pay back borrowed money, possibly from a bank or through bonds, with a specified interest rate at a future date that is longer than one year, this agreement would be recognized as a note payable (also known as a promissory note) and categorized as a long-term liability on the balance sheet.

User Januson
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