Multiple Choice
Which financial statement reports a company's assets and liabilities?
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2. Transaction Analysis
Classified Balance Sheet Components
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Which liability subsections are typically shown on a classified balance sheet?
A
Current Liabilities and Long-term Liabilities
B
Contingent Liabilities and Accrued Liabilities
C
Operating Liabilities and Non-operating Liabilities
D
Short-term Liabilities and Deferred Liabilities
Verified step by step guidance1
Understand the concept of a classified balance sheet: A classified balance sheet organizes assets, liabilities, and equity into subcategories to provide more detailed information about the financial position of a company.
Focus on the liability section: Liabilities represent obligations the company owes to external parties, and they are typically divided into subsections based on their nature and timing.
Learn the two main liability subsections: On a classified balance sheet, liabilities are generally categorized into 'Current Liabilities' (obligations due within one year) and 'Long-term Liabilities' (obligations due after one year).
Review examples of each subsection: Current liabilities include accounts payable, short-term loans, and accrued expenses, while long-term liabilities include bonds payable, long-term leases, and pension obligations.
Eliminate incorrect options: Contingent liabilities, operating liabilities, and deferred liabilities are not standard subsections on a classified balance sheet. Focus on the correct subsections: Current Liabilities and Long-term Liabilities.
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