What are trade payables?

What are trade payables?

• A. Funds received from customers
• B. Amounts billed to the company by suppliers for goods delivered
• C. Income earned from service rendered
• D. Investments made by shareholders

Answer: (B)

Trade payables refer to the amounts that a company owes to its suppliers for goods or services that have been delivered but not yet paid for. This represents a liability on the company’s balance sheet. When a company purchases inventory or services on credit, it receives an invoice from the supplier, which becomes part of its trade payables until the company settles the invoice or pays the supplier. This definition is central to understanding how businesses manage their cash flow and working capital. Trade payables play a critical role in the credit terms of a company, allowing it to maintain operations without immediate cash outflows. The other choices do not accurately reflect the concept of trade payables. Funds received from customers pertain to accounts receivable, income from services rendered relates to revenue, and investments made by shareholders are reflected in equity, none of which captures the essence of trade payables. Understanding trade payables is crucial for assessing a company's liquidity and operational efficiency.

Trade payables refer to the amounts that a company owes to its suppliers for goods or services that have been delivered but not yet paid for. This represents a liability on the company’s balance sheet. When a company purchases inventory or services on credit, it receives an invoice from the supplier, which becomes part of its trade payables until the company settles the invoice or pays the supplier.

This definition is central to understanding how businesses manage their cash flow and working capital. Trade payables play a critical role in the credit terms of a company, allowing it to maintain operations without immediate cash outflows.

The other choices do not accurately reflect the concept of trade payables. Funds received from customers pertain to accounts receivable, income from services rendered relates to revenue, and investments made by shareholders are reflected in equity, none of which captures the essence of trade payables. Understanding trade payables is crucial for assessing a company's liquidity and operational efficiency.