Future Business Leaders of America (FBLA) Accounting Practice Test

Which of the following is considered an asset?

1. A loan to be paid

2. Cash in the bank

3. Accounts payable

4. A business's obligations

The correct answer is: Cash in the bank

Cash in the bank is considered an asset because it is a resource owned by the business that has economic value and can be used to meet obligations, fund operations, or invest in future opportunities. Assets represent the right to receive future economic benefits due to past transactions. Cash is the most liquid asset, meaning it can be readily used or converted into other forms of value. In comparison, a loan to be paid represents a liability for the business and is not an asset. Accounts payable also represents a liability, indicating money the business owes to creditors, rather than something of value it owns. Lastly, a business's obligations are also liabilities, which represent future economic sacrifices the business is required to make to settle its debts. Therefore, among the choices provided, only cash in the bank fits the definition of an asset.