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 statements regarding liabilities is true?

Liabilities do not include amounts owed to suppliers.

Accounts payable is classified as a long-term liability.

Long-term liabilities are always due within the next twelve months.

Current liabilities are obligations expected to be settled within one year or the operating cycle, whichever is longer.

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Verified step by step guidance

Step 1: Understand the concept of liabilities. Liabilities are obligations that a company owes to external parties, such as suppliers, lenders, or creditors. They are classified into current liabilities and long-term liabilities based on their due dates.

Step 2: Clarify the definition of current liabilities. Current liabilities are obligations expected to be settled within one year or the operating cycle, whichever is longer. Examples include accounts payable, short-term loans, and accrued expenses.

Step 3: Clarify the definition of long-term liabilities. Long-term liabilities are obligations that are not due within the next twelve months. Examples include bonds payable, long-term loans, and lease obligations.

Step 4: Evaluate the incorrect statements: (a) Liabilities do include amounts owed to suppliers, such as accounts payable. (b) Accounts payable is classified as a current liability, not a long-term liability. (c) Long-term liabilities are not always due within the next twelve months; they are due beyond that period.

Step 5: Confirm the correct statement: Current liabilities are obligations expected to be settled within one year or the operating cycle, whichever is longer. This aligns with the definition of current liabilities in financial accounting.