Which term means the debts of a business?

Which term means the debts of a business?

• A. Liabilities
• B. Accounts receivable
• C. Assets
• D. Fixed assets

Answer: (A)

Debts a business owes to others are called liabilities. They are obligations that will require future outflows of resources, such as loans payable, accounts payable to suppliers, taxes payable, and accrued expenses. This distinguishes liabilities from assets, which are resources the company owns, and from accounts receivable, which is money customers owe the business (an asset). Fixed assets are long-term tangible items like equipment or buildings, not debts. So the term for the debts of a business is liabilities.

Debts a business owes to others are called liabilities. They are obligations that will require future outflows of resources, such as loans payable, accounts payable to suppliers, taxes payable, and accrued expenses. This distinguishes liabilities from assets, which are resources the company owns, and from accounts receivable, which is money customers owe the business (an asset). Fixed assets are long-term tangible items like equipment or buildings, not debts. So the term for the debts of a business is liabilities.