A business purchasing inventory on credit creates a liability known as:

Question

Quizplus · Accepted Answer

When a business purchases inventory on credit, it owes money to its suppliers. This creates a liability known as accounts payable. Option A, accounts receivable, refers to money owed to the business by its customers for sales already made. Option B, inventory, is not a liability but an asset as it represents the products that the business plans to sell. Option C, supplies, are also assets that are used in the business but are not inventory.

A Business Purchasing Inventory on Credit Creates a Liability Known