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 NOT considered a current liability?

Unearned Revenue (to be earned within 1 year)

Accrued Expenses

Notes Payable (due in 2 years)

Accounts Payable

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Verified step by step guidance

Step 1: Understand the definition of a current liability. A current liability is an obligation that a company expects to settle within one year or the operating cycle, whichever is longer. Examples include accounts payable, accrued expenses, and unearned revenue (if it will be earned within one year).

Step 2: Analyze each option provided in the problem. Unearned revenue (to be earned within 1 year) is considered a current liability because the company has an obligation to provide goods or services within the year. Accrued expenses are also current liabilities because they represent expenses incurred but not yet paid, typically settled within one year. Accounts payable is a current liability as it represents amounts owed to suppliers, usually settled within the operating cycle.

Step 3: Examine the option 'Notes Payable (due in 2 years).' Notes payable refers to written promises to pay a specific amount at a future date. If the due date is beyond one year, it is classified as a non-current liability because it does not meet the criteria for settlement within one year.

Step 4: Compare the classification of 'Notes Payable (due in 2 years)' with the other options. Since it is due in two years, it does not qualify as a current liability, unlike the other options which are obligations expected to be settled within one year.

Step 5: Conclude that 'Notes Payable (due in 2 years)' is NOT considered a current liability, as it is classified as a long-term liability due to its settlement period exceeding one year.