Understanding Liability Accounts

Which of the following is a liability account? A) Accounts Receivable B) Accounts Payable C) Salaries Expense D) Equipment

• Cash

• Prepaid Expenses

• B) Accounts Payable

• Inventory

What is the primary purpose of a liability account? A) To track income B) To track expenses C) To track obligations D) To track assets

• G) To track liabilities

• F) To track revenue

• C) To track obligations

• E) To track investments

Which of the following is NOT a liability? A) Notes Payable B) Unearned Revenue C) Cash D) Accrued Liabilities

• C) Cash

• Inventory

• Prepaid Expenses

• Accounts Receivable

What type of account is 'Long-term Debt'? A) Asset B) Liability C) Equity D) Revenue

• C) Fixed Asset

• B) Liability

• A) Current Asset

• D) Operating Income

Which of the following accounts would increase with a credit? A) Accounts Receivable B) Accounts Payable C) Cash D) Inventory

• A) Accounts Receivable

• C) Cash

• D) Inventory

• B) Accounts Payable

What is the normal balance of a liability account? A) Debit B) Credit C) Zero D) Depends on the account

• D) Revenue

• A) Asset

• B) Credit

• C) Expense

Which of the following is an example of a current liability? A) Bonds Payable B) Accounts Payable C) Equipment D) Land

• C) Inventory

• D) Prepaid Expenses

• B) Accounts Payable

• A) Notes Payable

What does 'Accounts Payable' represent? A) Money owed to suppliers B) Money owed by customers C) Cash on hand D) Investments

• Money received from sales

• A) Money owed to suppliers

• Short-term loans

• Assets owned by the company

Which financial statement would you find liabilities listed? A) Income Statement B) Cash Flow Statement C) Balance Sheet D) Statement of Retained Earnings

• G) Financial Position Statement

• E) Profit and Loss Statement

• F) Statement of Cash Flows

• C) Balance Sheet

What is the effect of paying off a liability on the accounting equation? A) Assets increase B) Liabilities decrease C) Equity increases D) No effect on the equation

• Assets decrease

• B) Liabilities decrease

• Equity decreases

• Liabilities remain unchanged