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 is a characteristic of a liability?

It is an asset that is used in the production of goods and services.

It represents a present obligation arising from past events.

It is always classified as a non-current asset.

It is an owner's residual interest in the assets of the entity.

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Verified step by step guidance

Step 1: Understand the definition of a liability in financial accounting. A liability is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits.

Step 2: Analyze the options provided in the problem. The first option describes an asset used in production, which is not a liability. The third option refers to non-current assets, which are also not liabilities. The fourth option describes owner's equity, which is the residual interest in the assets of the entity after deducting liabilities.

Step 3: Focus on the second option, which states that a liability represents a present obligation arising from past events. This aligns with the definition of a liability in financial accounting.

Step 4: Confirm that liabilities are obligations that require the entity to transfer resources (such as cash or goods) to settle the obligation, typically due to past transactions or events.

Step 5: Conclude that the correct characteristic of a liability is that it represents a present obligation arising from past events, as this matches the fundamental definition of liabilities in financial accounting.