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

Insurance on a company’s buildings would most likely be classified as a:

Operating expense

Contingent liability

Current liability

Long-term liability

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Verified step by step guidance

Understand the nature of the expense: Insurance on a company’s buildings is a recurring cost incurred to protect the company’s assets. It is not a liability but an expense related to the operation of the business.

Review the definition of operating expenses: Operating expenses are costs incurred during the normal course of business operations, such as rent, utilities, salaries, and insurance.

Eliminate the other options: Contingent liability refers to potential obligations dependent on future events, current liability refers to short-term obligations due within a year, and long-term liability refers to obligations due after a year. Insurance does not fit into any of these categories.

Classify the expense: Since insurance is a recurring cost necessary for the operation of the business, it is classified as an operating expense.

Conclude the classification: Based on the definitions and elimination of other options, insurance on a company’s buildings is most appropriately classified as an operating expense.