Florida General Contractor Practice Exam

A company's bills that are mailed out but unpaid along with bills that a company owes are referred to as what?

1. Accounts Receivable

2. Accounts Payable

3. Current Liabilities

4. Outstanding Debts

The correct answer is: Accounts Payable

The correct answer is that the company's bills that are mailed out but unpaid, as well as bills that the company owes, are referred to as Accounts Payable. This term specifically describes the liabilities that a company has incurred but has not yet settled, typically in the form of unpaid invoices for goods or services received. Accounts Payable is a crucial aspect of a company's balance sheet, representing money owed to suppliers and vendors. It reflects an organization's short-term obligations, illustrating its commitment to fulfill these debts in the future. This classification helps businesses manage cash flow and budgeting, ensuring that they maintain a healthy financial status by tracking what they owe. Knowing the distinction between Accounts Payable and other financial terms aids in understanding a company’s financial health. For instance, Accounts Receivable refers to money that customers owe the business, while Current Liabilities encompass a broader category that includes all short-term debts, and Outstanding Debts can be a more generic term that may not specifically refer to accounts payable. Understanding these terms is essential for effective financial management in the contracting business.