Which account is not a liability account ?
1. Account payable
2. Accrued Expenses
3. Cash
4. Notes payable
Answers
Cash is not a liability account.
Account payable, notes payable and accured expenses are all a liability in nature while cash represents assets.
Cash is the most liquid asset.
All the rest options indicate a liability that needs to be paid and would create a outflow.
Many people believe taht accrues expenses are not a liability which is wrong as they would eventually be paid too.
Answer:
- Account payable
It is also known as bills payable. When goods are purchased on credit, it seller draws a bill to the buyer which the buyer needs to be paid back within a short period of time, it is known as Accounts Payable. It is treated as a liability and comes under the head 'current liabilities'. Accounts Payable is a short-term debt payment which needs to be paid to avoid default.
- Accrued Expenses -
Accrued Expenses are also known as Outstanding expenses. These expenses are due to the service holder. The general example of accrued expenses is rent due for 5 months, the outstanding salary of an employee, outstanding wages, outstanding freight charges etc. It comes under the head of current liabilities. Therefore accrued expenses are the liability of a firm, hence treated as in a liability account.
- Cash
It is an asset to the firm since it is not an obligation but rather defines the liquidity of a firm. Cash can be of different forms like cash in hand, cash at a bank or other marketable securities which has high liquidity. It comes under the heading of the Current asset of the balance sheet. Hence, Cash is not a liability but an asset to a firm.
- Notes payable -
These are the long-term liabilities that show the money a company owes to its financiers like banks and other financial institutions as well as other sources of funds such as friends and family. These are long-term liabilities because they are payable beyond 12 months, though usually within five years.
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