Which of the following best describes the purpose of liability in an agency?

The purpose of liability in an agency is primarily to indicate financial responsibilities. This concept encompasses the debts and obligations a business incurs in the course of its operations, which are essential for understanding the agency's financial health and risks. Liabilities are crucial as they provide insight into the agency's commitments to external parties, including creditors, vendors, and other stakeholders.

This understanding helps stakeholders make informed decisions about the agency's creditworthiness and financial stability. It is vital for an agency to manage its liabilities effectively to ensure it can meet its obligations and sustain its operations over time. The liabilities also play a key role in financial reporting and operational planning, influencing how resources are allocated and how the agency strategizes for future growth.

While other options touch on relevant aspects of agency operations, they do not encapsulate the central function of liability. For instance, representing client assets or reflecting sales revenue are more aligned with the agency's operational functions or financial performance rather than its liabilities. Outlining agency goals pertains to strategic planning rather than financial obligations. Therefore, recognizing liability as an indicator of financial responsibilities accurately captures its significance in an agency context.