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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Struggling with Financial Accounting?

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Multiple Choice

Which of the following best defines a liability in financial accounting?

A distribution of profits to shareholders.

An asset that generates future economic benefits.

An increase in owner's equity due to investments.

A measurable obligation arising from agreements, contracts, or laws.

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Verified step by step guidance

Step 1: Understand the concept of a liability in financial accounting. A liability is defined as 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.

Step 2: Analyze the options provided in the question. Each option represents a different financial accounting term or concept.

Step 3: Eliminate incorrect options by comparing them to the definition of a liability. For example, 'A distribution of profits to shareholders' refers to dividends, not liabilities. 'An asset that generates future economic benefits' refers to assets, not liabilities. 'An increase in owner's equity due to investments' refers to equity, not liabilities.

Step 4: Focus on the correct option, which states 'A measurable obligation arising from agreements, contracts, or laws.' This aligns with the definition of a liability, as it represents an obligation that the entity is required to settle.

Step 5: Conclude that the correct answer is the option that matches the definition of a liability, emphasizing the importance of understanding key financial accounting terms and their distinctions.