Accounting for Liabilities: Payables and Long$-$Term Debt

In accounting, liabilities represent the obligations of a company or entity to pay money or provide goods and services to others in the future. Two common types of liabilities are payables and long$-$term debt.

Payables: Payables, also known as accounts payable, are short$-$term obligations that arise from the purchase of goods or services on credit. When a company buys goods or services on credit, it incurs a liability to pay the supplier or vendor in the future. Payables are typically recorded on the balance sheet as current liabilities and are usually settled within one year.

Long$-$Term Debt: Long$-$term debt refers to borrowings or financial obligations that are due beyond one year from the balance sheet date. Examples of long$-$term debt include bank loans, bonds payable, and mortgages. Long$-$term debt is recorded on the balance sheet as a non$-$current liability and may involve periodic interest payments and repayment of principal over an extended period.

Objective Type Question:

Which type of liability represents short$-$term obligations arising from the purchase of goods or services on credit?

A$)$ Long$-$term debt

B$)$ Accounts receivable

C$)$ Payables

D$)$ Equity