Which of the following is an example of a liability?

Which of the following is an example of a liability?

• A. Cash on hand
• B. Medical supplies inventory
• C. Outstanding loans
• D. Accounts receivable

Answer: (C)

A liability represents an obligation that a business owes to external parties, which can include loans, debts, or other financial commitments. Outstanding loans are a clear example of liabilities because they indicate money that the organization is required to repay to lenders or financial institutions. This obligation directly impacts the financial health of a business and is recorded on the balance sheet under liabilities. The other options reflect different types of accounts that do not represent liabilities. Cash on hand is an asset because it represents available funds that the business owns. Medical supplies inventory is also an asset, as it indicates resources that the business has available for operation. Accounts receivable are amounts owed to the business by customers and are considered assets because they represent future cash inflows that the business anticipates receiving. Thus, outstanding loans stand out as the correct answer by clearly fitting the definition of a liability.

A liability represents an obligation that a business owes to external parties, which can include loans, debts, or other financial commitments. Outstanding loans are a clear example of liabilities because they indicate money that the organization is required to repay to lenders or financial institutions. This obligation directly impacts the financial health of a business and is recorded on the balance sheet under liabilities.

The other options reflect different types of accounts that do not represent liabilities. Cash on hand is an asset because it represents available funds that the business owns. Medical supplies inventory is also an asset, as it indicates resources that the business has available for operation. Accounts receivable are amounts owed to the business by customers and are considered assets because they represent future cash inflows that the business anticipates receiving. Thus, outstanding loans stand out as the correct answer by clearly fitting the definition of a liability.