Chapter 8, Problem 3RQ

To determine

Current liabilities:

Current liabilities are debt obligations that need to be paid within a period of one year or less. Current liabilities are not always paid within one year. If company follows operating cycle then the current liabilities are defined according to the operating cycle of the company rather than the length of the year.

Example: Notes Payable, Accounts Payable, Payroll Liabilities.

Long-term Liabilities:

Long –term liabilities are debt obligations which are to be paid for more than one year.

Example: Mortgage Payable, Bonds Payable, Long-term notes Payable

To Discuss: The reason behind the importance of distinguishing between current and long-term liabilities.