In financial accounting, the Accounts Payable account is best classified as which type of liability?

• A. Contingent liability
• B. Current liability
• C. Deferred revenue (unearned revenue) liability
• D. Long-term liability

Answer: (B)

Verified step by step guidance

1. Understand the nature of the Accounts Payable account: it represents amounts a company owes to suppliers or vendors for goods or services received but not yet paid for.
2. Recall the classification of liabilities based on their due dates: current liabilities are obligations expected to be settled within one year or the operating cycle, whichever is longer.
3. Analyze the timing of Accounts Payable: since these amounts are typically due within a short period (usually within 30 to 90 days), they fit the definition of current liabilities.
4. Differentiate from other liability types: contingent liabilities depend on future events, deferred revenue represents payments received before delivering goods or services, and long-term liabilities are obligations due beyond one year.
5. Conclude that Accounts Payable is best classified as a current liability because it is a short-term obligation arising from normal business operations.