If you pay a vendor bill with a company credit card, which liability account should be updated?

• A. Credit Card Liability
• B. Accounts Payable
• C. Bank Cash
• D. Accounts Receivable

Answer: (A)

When you pay a vendor bill with a company credit card, you’re creating or increasing a liability to the card issuer, not to the vendor. The charge on the card is what you owe the credit card company, so the appropriate liability account to update is the Credit Card Liability. In practice, this flow reduces the vendor bill (Accounts Payable) while increasing the balance you owe on the credit card, rather than decreasing cash. Bank Cash would be used if you paid with actual cash or a bank transfer, and Accounts Receivable isn’t involved since it tracks money owed to you, not what you owe.