Abnormal Accounts Payable are characterized by which relationship?

• A. liquidation > expense
• B. expense > liquidation
• C. obligation > liquidation
• D. revenue > expense

Answer: (A)

Abnormal accounts payable show up when the cash you actually pay to settle payables (liquidation) is larger than the expenses recognized for that period. In accrual accounting, expenses reflect costs incurred, and accounts payable records the obligation to pay for those costs. If you end up paying more cash to reduce those payables than the expense you recorded in the same period, it means you’re clearing liabilities that either originated in a prior period or are not matched 1:1 with the current period’s expense. That mismatch—liquidation exceeding expense—signals an abnormal timing or cash flow pattern in the payables. For example, if you record an expense of 40 (creating 40 of AP) but subsequently pay 60 to settle, the extra 20 payments relate to earlier obligations, illustrating abnormal AP.