Multiple Choice
Which type of accounting is primarily concerned with recording and reporting business activities that involve the exchange of goods and services through electronic communication?
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1. Introduction to Accounting
Types of Accounting
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Which of the following is classified as a liability account?
A
Prepaid Expenses
B
Service Revenue
C
Accounts Payable
D
Equipment
Verified step by step guidance1
Understand the definition of a liability account: A liability account represents obligations or debts that a company owes to external parties, which are expected to be settled in the future, typically through the transfer of cash, goods, or services.
Analyze each option provided in the problem: Prepaid Expenses, Service Revenue, Accounts Payable, and Equipment.
Classify each option: Prepaid Expenses is an asset account because it represents payments made in advance for goods or services to be received in the future. Service Revenue is a revenue account, representing income earned from providing services. Equipment is an asset account, representing physical items used in operations.
Identify Accounts Payable: Accounts Payable is a liability account because it represents amounts owed by the company to suppliers or creditors for goods or services received but not yet paid for.
Conclude that Accounts Payable is the correct answer, as it fits the definition of a liability account.
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