Which of the following is an example of a current liability? A) Bonds payable due in 5 years B) Accounts receivable C) Salaries payable D) Mortgage payable
Accounting for liabilities involves recording and managing obligations a company owes to external parties. Liabilities are classified based on their nature and timing of settlement. Common types include:
Current Liabilities: Debts or obligations expected to be settled within one year or the operating cycle, whichever is longer. Examples include accounts payable, accrued expenses, and short-term loans.
Long-Term Liabilities: Obligations not due within the next operating cycle or one year. Examples include long-term loans, bonds payable, and lease obligations.
Contingent Liabilities: Potential obligations that depend on a future event, such as lawsuits or warranties. They are disclosed in the footnotes of financial statements unless the likelihood of payment is remote.
Deferred Revenue: Payments received in advance for goods or services to be provided in the future. They are recorded as liabilities until the revenue recognition criteria are met.
Accrued Liabilities: Expenses that have been incurred but not yet paid. Examples include accrued wages, taxes, and utilities.
Now, here's your objective type question:
Which of the following is an example of a current liability?
A) Bonds payable due in 5 years
B) Accounts receivable
C) Salaries payable
D) Mortgage payable
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