Multiple Choice QuestionJoan owns a flower shop. As a small business owner, she carefully manages the finances of her business. If Joan purchases flowers from a local producer for $500 and agrees to pay for the flowers within a month, Joan will list the $500 bill as _______ on her balance sheet.Multiple choice question.revenueaccounts payableaccounts receivablelong-term debt
Question
Multiple Choice QuestionJoan owns a flower shop. As a small business owner, she carefully manages the finances of her business. If Joan purchases flowers from a local producer for 500 bill as _______ on her balance sheet.Multiple choice question.revenueaccounts payableaccounts receivablelong-term debt
Solution
The correct answer is "accounts payable".
Here's why:
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Revenue: This is the income that a business has from its normal business activities, usually from the sale of goods and services to customers. In this case, Joan hasn't made any sales yet, so this option is incorrect.
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Accounts Payable: This is the amount of money a company owes to its suppliers. Since Joan has purchased flowers and agreed to pay for them within a month, this is considered an accounts payable. So, this is the correct answer.
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Accounts Receivable: This is the amount of money owed to a company by its customers. Since Joan is the one who owes money in this scenario, not her customers, this option is incorrect.
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Long-term Debt: This refers to loans and financial obligations lasting over one year. Since Joan is expected to pay for the flowers within a month, this is not considered long-term debt. So, this option is incorrect.
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