What is the liability arising from the purchase of goods or services on credit?Group of answer choicesA. CreditB. Accounts payableC. LoanD. Accounts receivable

Break Down the Problem

1. Identify the nature of liability related to purchasing goods or services on credit.
2. Analyze the options provided in the context of accounting and finance.

Relevant Concepts

• Liability: In accounting, liabilities represent obligations owed by a business to other parties.
• Accounts Payable: This is a short-term obligation that arises when a business purchases goods or services on credit.

Analysis and Detail

1. The act of purchasing goods or services on credit creates a liability because the buyer has an obligation to pay the seller at a later date.
2. Among the options given:
   • A. Credit: This is not a liability; it refers to the ability to borrow or purchase something with the promise to pay later.
   • B. Accounts payable: This directly refers to the amounts the company owes to suppliers for purchases made on credit, hence representing a liability.
   • C. Loan: This typically refers to a borrowed sum from a lender which does not encompass all goods or services purchased on credit.
   • D. Accounts receivable: This is an asset and refers to money owed to the business by its customers.

Verify and Summarize

Upon reviewing the options, "Accounts Payable" (B) accurately defines the liability arising from purchasing goods or services on credit, as it represents amounts the company must pay to its suppliers.

Final Answer

B. Accounts payable is the liability arising from the purchase of goods or services on credit.