Which item is typically included under liabilities on a net worth statement?

Which item is typically included under liabilities on a net worth statement?

• A. Loans payable
• B. Inventory
• C. Cash on hand
• D. Accounts receivable

Answer: (A)

On a net worth statement, liabilities are the obligations the business owes to others. Loans payable fit this category because they are borrowed funds that must be repaid, often with interest, and thus represent a financial obligation. The other items are assets: inventory is what you own as stock, cash on hand is money you own, and accounts receivable is money owed to you. Assets increase net worth, while liabilities decrease it. So loans payable is the item that belongs under liabilities.

On a net worth statement, liabilities are the obligations the business owes to others. Loans payable fit this category because they are borrowed funds that must be repaid, often with interest, and thus represent a financial obligation. The other items are assets: inventory is what you own as stock, cash on hand is money you own, and accounts receivable is money owed to you. Assets increase net worth, while liabilities decrease it. So loans payable is the item that belongs under liabilities.