Increase in Accounts Payable

D

An increase in accounts payable shows a decrease in the outflow of cash.

An increase in accounts payable would be considered D. a source of cash.

Accounts payable is a liability account on the balance sheet that represents the amount owed by a company to its suppliers or vendors for goods or services received on credit. When a company receives goods or services on credit, it creates an account payable, indicating that it has an obligation to pay the supplier in the future.

An increase in accounts payable means that the company has received more goods or services on credit during a given period. This increase represents additional funds available to the company, as it effectively extends the payment period for the company's obligations. By not immediately paying for the goods or services, the company can use the funds for other purposes, such as investing in new projects or paying off other liabilities.

Therefore, an increase in accounts payable is considered a source of cash because it provides additional cash flow to the company. It reflects a delay in the cash outflow, allowing the company to retain the funds for a longer period before settling its payables.

To summarize, an increase in accounts payable is a liability account on the balance sheet that represents the amount owed by a company to its suppliers for goods or services received on credit. It is considered a source of cash because it represents additional funds available to the company, as it extends the payment period for its obligations and allows the company to retain cash for other purposes.