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 transactions would result in a decrease to the company’s liabilities?

Issuing bonds payable

Making a payment on an outstanding loan

Purchasing inventory on credit

Receiving cash from a customer in advance for future services

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Verified step by step guidance

Understand the concept of liabilities: Liabilities represent obligations or debts that a company owes to external parties, such as loans, accounts payable, or bonds payable.

Analyze each transaction to determine its impact on liabilities: For example, issuing bonds payable increases liabilities because the company is borrowing money. Purchasing inventory on credit also increases liabilities because the company is incurring debt to acquire inventory.

Focus on the transaction 'Making a payment on an outstanding loan': When a company makes a payment on a loan, it reduces the loan balance, which directly decreases liabilities. This is because the company is fulfilling part of its obligation.

Consider the transaction 'Receiving cash from a customer in advance for future services': This creates a liability called unearned revenue because the company now owes services to the customer. It does not decrease liabilities; instead, it increases them.

Conclude that the transaction 'Making a payment on an outstanding loan' is the correct choice for decreasing liabilities, as it reduces the company's debt obligations.