Multiple Choice
Which type of liability is most directly associated with an insured purchasing a 15-year level term insurance policy?
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9. Current Liabilities
Types of Liabilities
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Liabilities are classified on the balance sheet as current or:
A
contingent
B
deferred
C
noncurrent
D
operating
Verified step by step guidance1
Understand the classification of liabilities on the balance sheet. Liabilities are obligations that a company owes to external parties and are categorized based on their due dates.
Current liabilities are obligations that are expected to be settled within one year or the operating cycle, whichever is longer. Examples include accounts payable, short-term loans, and accrued expenses.
Noncurrent liabilities, also known as long-term liabilities, are obligations that are not expected to be settled within one year. Examples include long-term loans, bonds payable, and lease obligations.
Contingent liabilities are potential obligations that may arise depending on the outcome of a future event. These are disclosed in the notes to the financial statements rather than classified as current or noncurrent on the balance sheet.
Deferred liabilities are obligations that are postponed or delayed, such as deferred tax liabilities. These are typically classified as noncurrent liabilities on the balance sheet.
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