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 is true about debt as a liability?

Debt is classified as an asset on the balance sheet.

Debt represents an obligation that must be repaid in the future, often with interest.

Debt is only recorded when it is related to equity financing.

Debt does not require any future payment or settlement.

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Verified step by step guidance

Step 1: Understand the concept of debt as a liability. Debt represents an obligation that a company owes to external parties, such as lenders or creditors, and it must be repaid in the future, often with interest. It is classified as a liability on the balance sheet, not an asset.

Step 2: Analyze the incorrect options. The first option, 'Debt is classified as an asset on the balance sheet,' is incorrect because debt is a liability, not an asset. Assets represent resources owned by the company, while liabilities represent obligations.

Step 3: Evaluate the second option, 'Debt represents an obligation that must be repaid in the future, often with interest.' This is correct because it accurately describes the nature of debt as a liability.

Step 4: Review the third option, 'Debt is only recorded when it is related to equity financing.' This is incorrect because debt is recorded regardless of whether it is related to equity financing. Debt can arise from loans, bonds, or other forms of borrowing.

Step 5: Assess the fourth option, 'Debt does not require any future payment or settlement.' This is incorrect because debt inherently requires repayment or settlement in the future, often with interest, as part of the obligation.