What is the term for money that a company owes to its suppliers and creditors?

What is the term for money that a company owes to its suppliers and creditors?

• A. Loans payable
• B. Accounts receivable
• C. Accounts payable
• D. Equity capital

Answer: (C)

The term for the money that a company owes to its suppliers and creditors is known as accounts payable. This represents the amount of short-term debt a company has, reflecting the obligations to settle invoices from suppliers for goods or services received but not yet paid for. Accounts payable is classified as a current liability on the balance sheet, indicating that the company is expected to pay these obligations within a year. Having a clear understanding of accounts payable is crucial for managing cash flow and maintaining positive relationships with suppliers. It allows a company to track its debts and assess its short-term liquidity position effectively. In contrast, options like loans payable refer specifically to longer-term borrowed funds, accounts receivable pertains to money owed to the company by its customers, and equity capital represents ownership interest in the company, none of which define an obligation to suppliers and creditors. Understanding these distinctions helps in interpreting financial statements and managing a company's finances effectively.

The term for the money that a company owes to its suppliers and creditors is known as accounts payable. This represents the amount of short-term debt a company has, reflecting the obligations to settle invoices from suppliers for goods or services received but not yet paid for. Accounts payable is classified as a current liability on the balance sheet, indicating that the company is expected to pay these obligations within a year.

Having a clear understanding of accounts payable is crucial for managing cash flow and maintaining positive relationships with suppliers. It allows a company to track its debts and assess its short-term liquidity position effectively. In contrast, options like loans payable refer specifically to longer-term borrowed funds, accounts receivable pertains to money owed to the company by its customers, and equity capital represents ownership interest in the company, none of which define an obligation to suppliers and creditors. Understanding these distinctions helps in interpreting financial statements and managing a company's finances effectively.