Certified Medical Administrative Assistants (CMAA) Practice Exam

Which of the following best describes what an 'accounts payable' represents?

1. Money owed to suppliers

2. Revenue earned but not received

3. Assets owned by a company

4. Net profit forecast

The correct answer is: Money owed to suppliers

'Accounts payable' refers specifically to the obligations a business has to pay off short-term debts to its creditors or suppliers. When a company purchases goods or services on credit, it incurs liabilities that need to be settled in the future, which creates an accounts payable entry. This is crucial for managing cash flow and ensuring that the company maintains good relationships with suppliers by paying invoices on time. The other choices describe different financial concepts. Revenue earned but not received pertains to accounts receivable, which tracks money owed to the company by its customers. Assets owned by a company encompass all resources that provide future economic benefits. A net profit forecast involves predicting the income after all expenses are deducted, which does not directly relate to the accounts payable concept. Understanding accounts payable is essential for effective financial management in any organization.