Which of the following is a current liability?

• A. Accounts receivable
• B. Inventory
• C. Accounts payable
• D. Cash

Answer: (C)

Current liabilities are obligations the company expects to settle within one year (or the operating cycle, if longer). An amount owed to suppliers for goods or services that have already been received is a classic example because it requires a future outflow of cash in the near term. That’s why accounts payable fits as a current liability: it represents short-term debts the business must pay.

By contrast, accounts receivable is an asset—the money customers owe to the company. Inventory is also an asset—the goods the company has on hand to sell. Cash is the ultimate asset, representing the actual money available to the business. So the item that aligns with the definition of a current liability is accounts payable.