Which category includes items such as Mortgage Payable and Dividends Payable?

Which category includes items such as Mortgage Payable and Dividends Payable?

• A. Assets
• B. Liabilities
• C. Equity
• D. Revenues

Answer: (B)

Obligations to repay or settle in the future define a liability. Mortgage payable is a loan that the company must repay, often secured by property, so it represents a creditor claim on the company’s assets. Dividends payable are amounts the company has declared to shareholders but hasn’t yet paid; until payment, the company owes cash to owners, which makes it a liability too. In the accounting equation, liabilities sit to the right of assets to show claims against resources the company controls. While mortgage payable is usually a long-term liability (with the portion due within a year becoming a current liability), both items are obligations rather than assets, revenues, or equity. So they belong in the liabilities category.

Obligations to repay or settle in the future define a liability. Mortgage payable is a loan that the company must repay, often secured by property, so it represents a creditor claim on the company’s assets. Dividends payable are amounts the company has declared to shareholders but hasn’t yet paid; until payment, the company owes cash to owners, which makes it a liability too. In the accounting equation, liabilities sit to the right of assets to show claims against resources the company controls. While mortgage payable is usually a long-term liability (with the portion due within a year becoming a current liability), both items are obligations rather than assets, revenues, or equity. So they belong in the liabilities category.