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 a characteristic of a liability?

It is an asset controlled by the entity.

It is always payable in cash only.

It results in probable future economic benefits to the entity.

It represents a present obligation arising from past events.

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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.

Eliminate incorrect options: Review each option and compare it to the definition of a liability. For example, 'It is an asset controlled by the entity' is incorrect because assets and liabilities are distinct concepts.

Analyze the second option: 'It is always payable in cash only' is incorrect because liabilities can be settled in various forms, such as goods, services, or other assets, not just cash.

Evaluate the third option: 'It results in probable future economic benefits to the entity' is incorrect because this describes an asset, not a liability.

Confirm the correct answer: 'It represents a present obligation arising from past events' aligns with the definition of a liability, making it the correct choice.