Multiple Choice
Sales taxes payable is reported as a(n):
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9. Current Liabilities
Types of Liabilities
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Current liabilities are due:
A
only upon liquidation of the company
B
within one year or the operating cycle, whichever is longer
C
within ten years of the reporting date
D
after five years from the balance sheet date
Verified step by step guidance1
Understand the concept of current liabilities: Current liabilities are obligations that a company expects to settle within a short period, typically within one year or the operating cycle, whichever is longer.
Review the operating cycle: The operating cycle refers to the time it takes for a company to purchase inventory, sell it, and collect cash from customers. If the operating cycle is longer than one year, current liabilities are classified based on the operating cycle duration.
Analyze the options provided: Compare each option against the definition of current liabilities. For example, obligations due upon liquidation or after five years do not meet the criteria for current liabilities.
Focus on the correct timeframe: Current liabilities are due within one year or the operating cycle, whichever is longer. This aligns with the accounting principle of classifying liabilities based on their expected settlement period.
Conclude the correct answer: Based on the definition and analysis, the correct answer is 'within one year or the operating cycle, whichever is longer.'
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