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Accounting for Liabilities: Payables and Long - Term Debt In accounting, liabilities represent the obligations of a company or entity to pay money or provide
Accounting for Liabilities: Payables and LongTerm 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 longterm debt.
Payables: Payables, also known as accounts payable, are shortterm 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.
LongTerm Debt: Longterm debt refers to borrowings or financial obligations that are due beyond one year from the balance sheet date. Examples of longterm debt include bank loans, bonds payable, and mortgages. Longterm debt is recorded on the balance sheet as a noncurrent liability and may involve periodic interest payments and repayment of principal over an extended period.
Objective Type Question:
Which type of liability represents shortterm obligations arising from the purchase of goods or services on credit?
A Longterm debt
B Accounts receivable
C Payables
D Equity
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