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Suppliers providing goods on credit is an example of past transactions that lead to

a) Accounts receivable
b) Accounts payable
c) Revenue recognition
d) Depreciation

1 Answer

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Final answer:

Suppliers providing goods on credit create a liability for the buyer, recorded as Accounts payable on the buyer's balance sheet.

Step-by-step explanation:

When suppliers provide goods on credit, they are offering the buyer the opportunity to pay for the goods at a future date. This transaction represents an obligation for the buyer to pay the supplier, which is recorded on the buyer's balance sheet as Accounts payable. Accounts payable is a liability because it is an amount the company owes to its suppliers for goods or services received.

A T-account can help visualize this: on the buyer’s balance sheet, the T-account will show an increase in assets (inventory) on the debit side and an increase in accounts payable on the credit side, maintaining the balance sheet's equation of Assets = Liabilities + Equity.

Consequently, the correct answer to the student's question is that suppliers providing goods on credit is an example of Accounts payable.

User Jakub Judas
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