A Liability Is Properly Accounted for as an Account Payable

question 40

Multiple Choice

A liability is properly accounted for as an account payable if

• A) the amount is known and owed as of the balance sheet date.
• B) the amount can be estimated and is owed at the balance sheet date.
• C) the amount is known at the balance sheet date and owed by the end of the next fiscal year.
• D) the amount is estimated and owed within 90 days of the balance sheet date.

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Definitions:

Working Capital Policy

It refers to the strategy a company employs to manage its current assets and liabilities to ensure it has enough liquidity to run its operations efficiently.

Accounts Payable

Short-term financial obligations that a company owes to its suppliers or vendors for goods and services received.

Trade Credit Discounts

Reductions in price offered by suppliers to buyers as an incentive for early payment within a specified period.

Short-term Financing

Refers to borrowing options available to businesses for a period typically less than one year, to fulfill immediate financial needs.