What is a current liability that results when a business does not pay cash when the asset is purchased?

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BlackTom AI · Accepted Answer

Question restatement: What is a current liability that results when a business does not pay cash when the asset is purchased?
Option 1: unpaid wages. This refers to wages owed to employees that have not yet been paid; while it is a current liability, it is not related to the purchase of an asset with no cash payment. It arises from compensation obligations, not from purchasing assets on credit.
Option 2: interest paid. Interest paid is a cash outflow or an expense related to borrowed funds; it is not itself a liability arising from purchasing an asset on credit. It represents a cost already paid or due, but it doesn’t describe the liability created by asset acquisition without cash.
Option 3: accounts payable. This is the correct concept here. When a business buys an asset (or goods/services) and does not pay cash at the time of purchase, it creates a current liability called accounts payable, representing amounts owed to suppliers for short-term obligations.
Option 4: receipt. A receipt is evidence of a transaction or payment, not a liability. It does not represent a future obligation to pay and thus does not align with the description of a liability arising from buying an asset without cash.
In summary, the scenario described—purchasing an asset without paying cash at purchase—directly corresponds to creating an accounts payable, whereas the other options either describe different obligations, costs, or documentation that do not fit this specific situation.

VPAB13H3 F LEC01 Final Exam Quiz

What is a current liability that results when a business does not pay cash when the asset is purchased?

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