Which term describes the money a business owes to suppliers?

• A. Accounts payable
• B. Net worth
• C. Liquid assets
• D. Income

Answer: (A)

Accounts payable is the amount a company owes suppliers for goods or services received on credit. It’s a current liability on the balance sheet, reflecting short-term obligations to suppliers rather than assets or earnings. This differs from net worth (owner’s equity), which shows the value of the company after liabilities; liquid assets, which are cash or near-cash resources; and income, which is revenue earned from operations. Understanding accounts payable helps explain cash flow and working capital management, since delaying payment can conserve cash in the short term while timely payment maintains good supplier relationships and credit terms.