True or False question

Question

If accounts payable increase during an accounting period, then the cash paid for merchandise purchased is less than the merchandise purchases for the period.

Answer 1

When accounts payable increase, it means the company has purchased goods or services on credit but has not yet paid for them in cash. Therefore, the cash paid for merchandise is less than the total merchandise purchases during the period.

Example:

1. Suppose a company buys $100,000 of inventory in a period.
2. If accounts payable increases by $20,000, it means only $80,000 was paid in cash.
3. The remaining $20,000 is owed and will be paid later.

Conclusion:

An increase in accounts payable reflects that some purchases were not paid in cash, so cash outflow is lower than total purchases.

So yes — the statement is True.