ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Definition: When a company purchases goods on credit which needs to be paid back in a short period of time, it is known as Accounts Payable. It is treated as a liability and comes under the head ‘current liabilities’. Accounts Payable is a short-term debt payment which needs to be paid to avoid default.

Detailed explanation-2: -Accounts payable is a liability since it is money owed to creditors and is listed under current liabilities on the balance sheet. Current liabilities are short-term liabilities of a company, typically less than 90 days.

Detailed explanation-3: -Because accounts payable is a short-term debt that hasn’t yet been paid, it’s considered a liability.

Detailed explanation-4: -A current liability is one the company expects to pay in the short term using assets noted on the present balance sheet. Typical current liabilities include accounts payable, salaries, taxes and deferred revenues (services or products yet to be delivered but for which money has already been received).

Detailed explanation-5: -Accounts payable (AP) is a short-term debt and a liability on a balance sheet where a business owes money to its vendors/suppliers that have provided the business with goods or services on credit.