ACCOUNTING PRCINCIPLES (CCCS CUSTOM)
ACCOUNTING PRCINCIPLES (CCCS CUSTOM)
14th Edition
ISBN: 9781119845102
Author: Weygandt
Publisher: WILEY
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Chapter 11, Problem 1Q
To determine

Debt: An alternative to equity or capital to finance the assets of a company is called debt. When a company borrows money from banks and other financial institutions to acquire the required assets and to run the operations of the company, the borrowed money is called debt.

Current Liability: Every company has some debts or liabilities which need to be paid in less than one year or during the current accounting period. Those debts or liabilities are called current liabilities.

To Explain: Current liability is a debt that is expected to be paid in one year.

Expert Solution & Answer
Check Mark

Answer to Problem 1Q

Yes, L is correct because current liabilities are short-term debt and required to be paid in same accounting cycle or in one year whichever is longer.

Explanation of Solution

  • Liabilities usually categorized into two parts that are current liabilities and long-term liabilities based on their tenure.
  • So all the liabilities, required to pay after one year are reported under long-term liabilities.
  • Liabilities, supposed to be matured in one year or in current accounting period are reported under current liabilities.
Conclusion

L is right that current liabilities can be expected to be paid in one year.

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