Future Business Leaders of America (FBLA) Agribusiness Practice Test

What does accounts payable refer to?

1. Assets owed to the company

2. Unpaid bills or debt

3. Future income expected

4. Funds available in cash accounts

The correct answer is: Unpaid bills or debt

Accounts payable refers to the amount of money that a business owes to its suppliers or creditors for goods and services that have been received but not yet paid for. This is considered a liability on the company's balance sheet, representing a short-term obligation that the company is required to settle in the near future, typically within a year. When a company purchases items on credit, it creates an obligation to pay for those items later. This liability can include invoices from suppliers, unpaid bills, and other debts that must be cleared. Understanding accounts payable is crucial for managing cash flow, as it reflects the company's financial health and its ability to meet short-term obligations. In contrast, the other options describe different financial concepts. Assets owed to the company pertains to what others owe the business, future income refers to revenue that is expected but has not yet been received, and funds available in cash accounts relate to the actual cash on hand the business currently possesses. These items do not encompass the definition of accounts payable.