Multiple Choice
Which of the following is a disadvantage of bond financing?
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9. Current Liabilities
Types of Liabilities
Multiple Choice
In financial accounting, the Accounts Payable account is best classified as which type of liability?
A
Contingent liability
B
Current liability
C
Deferred revenue (unearned revenue) liability
D
Long-term liability
Verified step by step guidance1
Understand the nature of the Accounts Payable account: it represents amounts a company owes to suppliers or vendors for goods or services received but not yet paid for.
Recall the classification of liabilities based on their due dates: current liabilities are obligations expected to be settled within one year or the operating cycle, whichever is longer.
Analyze the timing of Accounts Payable: since these amounts are typically due within a short period (usually within 30 to 90 days), they fit the definition of current liabilities.
Differentiate from other liability types: contingent liabilities depend on future events, deferred revenue represents payments received before delivering goods or services, and long-term liabilities are obligations due beyond one year.
Conclude that Accounts Payable is best classified as a current liability because it is a short-term obligation arising from normal business operations.
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