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 current and long-term liabilities is true?

All liabilities must be paid in cash within the current accounting period.

Long-term liabilities are always paid before current liabilities.

Current liabilities are obligations expected to be settled within one year, while long-term liabilities are due after one year.

Current liabilities include only notes payable and bonds payable.

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Verified step by step guidance

Step 1: Understand the definition of liabilities. Liabilities are obligations that a company owes to external parties, which can be classified as current or long-term based on their due dates.

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

Step 3: Define long-term liabilities. Long-term liabilities are obligations that are due after one year or the operating cycle. Examples include bonds payable, long-term loans, and lease obligations.

Step 4: Analyze the statements provided in the problem. Evaluate each statement based on the definitions of current and long-term liabilities. For example, the statement 'Current liabilities are obligations expected to be settled within one year, while long-term liabilities are due after one year' aligns with the definitions provided.

Step 5: Identify the correct statement. Based on the analysis, the correct statement is the one that accurately describes the distinction between current and long-term liabilities, which is: 'Current liabilities are obligations expected to be settled within one year, while long-term liabilities are due after one year.'