In financial accounting, accounts payable are reported on which of the following financial statements?

• A. Balance sheet (statement of financial position)
• B. Statement of retained earnings as a reduction of retained earnings
• C. Income statement (statement of earnings)
• D. Statement of cash flows as a cash outflow when incurred

Answer: (A)

Verified step by step guidance

1. Understand the nature of accounts payable: it represents amounts a company owes to suppliers or creditors for goods and services received but not yet paid for, making it a liability.
2. Recall the classification of accounts payable in financial statements: since it is a liability, it is reported on the Balance Sheet (also known as the Statement of Financial Position).
3. Recognize that the Statement of Retained Earnings shows changes in equity, not liabilities, so accounts payable would not appear there.
4. Understand that the Income Statement reports revenues and expenses over a period, not liabilities, so accounts payable are not reported there directly.
5. Know that the Statement of Cash Flows reports cash inflows and outflows; while payments of accounts payable affect cash flows, the accounts payable balance itself is not reported as a line item on this statement.