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

When cash is surrendered from a recently-issued whole life insurance policy, how should this transaction be classified on the balance sheet?

It is classified as an accrued expense.

It is classified as a long-term liability.

It is not recognized as a liability.

It is classified as a current liability.

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Verified step by step guidance

Understand the nature of the transaction: Cash surrendered from a recently-issued whole life insurance policy represents a withdrawal or cash-out from the policy, not a liability or expense.

Review the definition of liabilities: Liabilities are obligations that a company owes to external parties, such as loans, accounts payable, or accrued expenses. This transaction does not create an obligation to pay or owe money.

Consider the classification of the transaction: Since the cash surrender does not represent a liability or expense, it should not be classified as a current liability, long-term liability, or accrued expense.

Analyze the balance sheet impact: The cash surrender would typically reduce the cash account (an asset) and may affect the equity or retained earnings section, depending on the nature of the transaction.

Conclude the classification: The transaction is not recognized as a liability because it does not meet the criteria for liabilities under financial accounting standards.