When a company purchases inventory on account (that is, on credit), which type of account is credited to record the transaction?

Question

Quizplus · Accepted Answer

When a company purchases inventory on account, it means that the company owes money to its suppliers. This is a liability to the company and should be recorded as a credit to the accounts payable account, which is a subcategory of the liability account. Therefore, the correct answer is A) liability.

When a Company Purchases Inventory on Account (That Is, on Credit)