Final answer:
An 'accounts payable' is a liability for a business. It represents the money owed to creditors for goods or services that have been received but not yet paid for.
Step-by-step explanation:
An 'accounts payable' is a liability. In accounting, liabilities are obligations or debts that a company owes to external parties. 'Accounts payable' represents the amount of money a company owes to its suppliers or vendors for goods or services received on credit. It is essentially a short-term liability as it reflects the company's obligation to make payments in the near future. When a company purchases goods or services on credit, it records an increase in 'accounts payable' on the liability side of its balance sheet. The corresponding entry is usually a debit to an expense or asset account, depending on the nature of the transaction. Once the company pays off the accounts payable, the liability is reduced, and the company's cash or bank account is decreased through a credit entry. Understanding the distinction between assets and liabilities is crucial for accurate financial reporting. Assets are resources owned by the company that have future economic value, while liabilities are obligations that need to be settled. 'Accounts payable' falls into the category of liabilities as it represents an obligation to pay off debts to external entities.