Question

What sort of transaction typically creates an account payable? What do wemean by accrued liabilities? Provide some common examples. What type oftransaction typically creates a note payable?

Answer 1

Account payable

When inventory or office supplies are purchased on credit , it creates account payable since amount is yet to be paid to the supplier from whom inventory has been purchased on credit.

Accrued liabilities

When a particular expense has not been paid so far, it becomes an accrued liability. In other words, outstanding expenses are the accrued liabilities of the business.

Examples - Salaries outstanding, Office rent outstanding, Electricity bill outstanding, stationery bill outstanding

Note payable

Notes payables are the promissory notes issued by a firm, accepting that the particular sum mentioned in the note will be repaid at the date mentioned on it. When a firm needs funds, it can borrow funds from bank by issuing a promissory note.

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