Accounts Payable is classified as which type of account?

• A. Asset
• B. Revenue
• C. Liability
• D. Expense

Answer: (C)

Accounts payable represents obligations the business has to suppliers for goods or services received on credit. That makes it a liability—an obligation to be settled in the future. It is not an asset, since assets are resources controlled by the business; not revenue, which is income earned from operations; and not an expense, which reflects costs incurred. On the balance sheet it appears as a current liability, usually due within a short period. In typical journal entries, buying on credit debits purchases or inventory and credits accounts payable; paying later debits accounts payable and credits cash, reducing the liability.