Which term is defined as Debts?

Which term is defined as Debts?

• A. Liabilities
• B. Net Worth
• C. Revenue
• D. Assets

Answer: (A)

Debts are obligations a business owes to others. In accounting, that category is called liabilities. They represent claims on the entity’s assets by creditors and arise from past events, meaning the company is expected to outflow resources in the future to settle them. Examples include loans, accounts payable to suppliers, accrued expenses, taxes payable, and bonds. Liabilities appear on the balance sheet and are typically split into current (short-term) and long-term kinds. They contrast with assets, which are the resources the company owns, and with net worth (owner’s equity), which is what remains after liabilities are subtracted from assets. Revenue is income earned from operations, not a description of what the company owes. So, the term defined as debts is liabilities.

Debts are obligations a business owes to others. In accounting, that category is called liabilities. They represent claims on the entity’s assets by creditors and arise from past events, meaning the company is expected to outflow resources in the future to settle them. Examples include loans, accounts payable to suppliers, accrued expenses, taxes payable, and bonds. Liabilities appear on the balance sheet and are typically split into current (short-term) and long-term kinds. They contrast with assets, which are the resources the company owns, and with net worth (owner’s equity), which is what remains after liabilities are subtracted from assets. Revenue is income earned from operations, not a description of what the company owes. So, the term defined as debts is liabilities.