Multiple Choice
Amala's balance sheet shows the following: Accounts Payable: $5,000; Notes Payable (due in 2 years): $10,000; Accrued Expenses: $2,000. What is the total of Amala’s liabilities?
24
views
9. Current Liabilities
Types of Liabilities
Struggling with Financial Accounting?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which of the following best describes current liabilities?
A
Assets that are expected to be converted to cash within one year.
B
Obligations that are expected to be settled within one year or the operating cycle, whichever is longer.
C
Owner's equity accounts reported on the balance sheet.
D
Obligations that are due in more than one year from the balance sheet date.
Verified step by step guidance1
Understand the definition of current liabilities: Current liabilities are obligations that a company expects to settle within one year or the operating cycle, whichever is longer.
Review the options provided in the problem and eliminate those that do not align with the definition of current liabilities.
Option 1 describes assets, not liabilities, so it does not match the definition of current liabilities.
Option 3 refers to owner's equity accounts, which are not liabilities, so it is not correct.
Option 4 describes long-term liabilities, which are obligations due in more than one year, so it does not match the definition of current liabilities.
Related Videos
Related Practice
Types of Liabilities practice set
Problem sets built by lead tutorsExpert video explanations