Multiple Choice
Which type of liability is created when a company purchases a $500,000 life insurance policy for an employee and names itself as the beneficiary?
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9. Current Liabilities
Types of Liabilities
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Which type of liability is represented by money owed for services or supplies that increases the account balance?
A
Unearned Revenue
B
Notes Payable
C
Accounts Payable
D
Accrued Expenses
Verified step by step guidance1
Understand the concept of liabilities: Liabilities are obligations that a company owes to external parties, typically arising from past transactions or events.
Review the types of liabilities mentioned: Unearned Revenue, Notes Payable, Accounts Payable, and Accrued Expenses. Each represents a different type of obligation.
Focus on Accounts Payable: Accounts Payable refers to money owed by a company to suppliers or vendors for goods or services received but not yet paid for. This increases the account balance as it represents an outstanding obligation.
Compare Accounts Payable with other options: Unearned Revenue is money received in advance for services not yet performed, Notes Payable is a formal written promise to pay a specific amount, and Accrued Expenses are expenses incurred but not yet paid. None of these directly represent money owed for services or supplies in the same way as Accounts Payable.
Conclude that Accounts Payable is the correct type of liability for money owed for services or supplies that increases the account balance.
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