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 represents a characteristic of a liability?

It is a present obligation arising from past events.

It is a future economic benefit controlled by the entity.

It is recorded only when cash is received.

It is an increase in owner's equity.

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Verified step by step guidance

Understand the definition of a liability: A liability is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits.

Analyze the first option: 'It is a present obligation arising from past events.' This aligns with the definition of a liability, as liabilities are obligations that exist due to past transactions or events.

Analyze the second option: 'It is a future economic benefit controlled by the entity.' This describes an asset, not a liability, as assets provide future economic benefits.

Analyze the third option: 'It is recorded only when cash is received.' This is incorrect because liabilities are recorded when the obligation is incurred, not when cash is received.

Analyze the fourth option: 'It is an increase in owner's equity.' This is incorrect because liabilities represent obligations, not increases in equity. Increases in equity are typically associated with revenues or investments by owners.