Which of the following is not a criterion that must be met for an item to be classified as a liability? A certain cash payment will occur in the future. A sacrifice will require the entity’s assets or services. There is a probable future sacrifice. There is a present obligation that results from a past transaction.
Which of the following is not a criterion that must be met for an item to be classified as a liability? A certain cash payment will occur in the future. A sacrifice will require the entity’s assets or services. There is a probable future sacrifice. There is a present obligation that results from a past transaction.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Which of the following is not a criterion that must be met for an item to be classified as a liability?
- A certain cash payment will occur in the future.
- A sacrifice will require the entity’s assets or services.
- There is a probable future sacrifice.
- There is a present obligation that results from a past transaction.
Expert Solution
Step 1
Introduction:-
A liability is commitment or responsibility of a company that results in the company's future sacrifices of economic benefits to other entities.
Liability is classified into two types:
- Current liability
- Non-current liability
An amount that settles by the organization within a short period like one year is called current liability.
Example: Accrued expense, short-term debt.
Non-current liabilities:
A liability which due after one year is called non-current and long-term liability.
Example: Long term loans, and debentures, etc.
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