INTERMEDIATE ACCOUNTING-NEXTGEN ACCESS
INTERMEDIATE ACCOUNTING-NEXTGEN ACCESS
17th Edition
ISBN: 9781119659747
Author: Kieso
Publisher: WILEY
Question
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Chapter 13, Problem 1Q
To determine

Current liability: Current liability refers to the debts of an organization. It is an obligation of the company that is due to be paid within one year.

Long-term debt: Long-term debt refers to the obligations of a firm that are due and has a due period exceeding a year.

To determine the difference between current liability and long-term debt.

Expert Solution & Answer
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Explanation of Solution

Both current liabilities and long-term debts act as a focal point of the financial planning efforts of an organization.

Current liabilities are obligations to be paid within a year. If the debts are paid within the stipulated period, the short-term liability of the company is found to be positive. This means that the company meets the cash flow needs and it is considered as a going concern.

Long-term debts are obligations for which the due period exceeds 1 year. If the debts are paid within the stipulated period, the long-term liquidity of the company will be positive. The probability of meeting the financial needs of the company turns to be favourable.

Conclusion

Hence, the difference between current liability and long-term debt are explained above.

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