Which account is classified as a liability?

• A. Accounts Receivable
• B. Sales
• C. Accounts Payable
• D. Supplies

Answer: (C)

Liability accounts reflect obligations to outsiders that will require future sacrifices of assets or services. Accounts payable fits this because it records amounts owed to suppliers for goods or services received on credit. It is a present obligation that will be settled with cash or other resources in the future, so it sits on the liabilities side of the balance sheet.

Accounts receivable, by contrast, is an asset: the company expects to receive cash from customers. Sales is a revenue item that increases equity through net income, not a liability. Supplies is an asset representing items the company has on hand to use in operations; it becomes an expense as those supplies are consumed. For example, buying inventory on credit increases both Supplies (asset) and Accounts Payable (liability).