Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

9. Current Liabilities

Types of Liabilities

Financial Accounting

9. Current Liabilities

Types of Liabilities

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Multiple Choice

Which of the following accounts is classified as a liability?

Equipment

Service Revenue

Prepaid Insurance

Accounts Payable

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Verified step by step guidance

Understand the definition of a liability: A liability is an obligation that a company owes to external parties, typically arising from past transactions or events, and is expected to be settled through the transfer of assets, services, or other economic benefits.

Review the provided accounts: Equipment, Service Revenue, Prepaid Insurance, and Accounts Payable. Determine whether each account fits the definition of a liability.

Analyze 'Equipment': Equipment is classified as an asset because it represents a resource owned by the company that is used in operations to generate revenue.

Analyze 'Service Revenue': Service Revenue is classified as a revenue account, representing income earned from providing services, not an obligation owed to external parties.

Analyze 'Prepaid Insurance' and 'Accounts Payable': Prepaid Insurance is an asset because it represents a payment made in advance for future benefits. Accounts Payable, however, is classified as a liability because it represents an obligation to pay for goods or services received on credit.