Multiple Choice
Long-term financing would normally be used to purchase which of the following?
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9. Current Liabilities
Types of Liabilities
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Obligations that are due within one year are:
A
Contingent liabilities
B
Long-term liabilities
C
Current liabilities
D
Deferred revenues
Verified step by step guidance1
Understand the concept of liabilities: Liabilities are obligations that a company owes to external parties, and they are classified based on their due dates.
Learn the classification of liabilities: Liabilities are generally categorized into current liabilities (due within one year) and long-term liabilities (due after one year).
Define current liabilities: Current liabilities are obligations that are expected to be settled within one year or within the operating cycle of the business, whichever is longer. Examples include accounts payable, short-term loans, and accrued expenses.
Differentiate from other types of liabilities: Contingent liabilities depend on future events and may not be recognized immediately. Long-term liabilities are obligations due after one year, and deferred revenues represent payments received in advance for goods or services yet to be delivered.
Conclude that obligations due within one year are classified as current liabilities, based on the definition and examples provided.
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