Certified Materials and Resource Professional Practice

Question: 1 / 400

Which of the following best describes a current liability?

Payments due within one year

A current liability is best described as payments that are due within one year. This definition is important in financial accounting because current liabilities represent obligations that a company is expected to settle in the short term, typically within its operating cycle. Examples of current liabilities include accounts payable, short-term loans, and accrued expenses.

Understanding current liabilities is crucial for analyzing a company's liquidity and financial health, as they reflect the immediate financial obligations the company must address to keep operations running smoothly. In contrast, the other options represent different financial concepts: unpaid long-term debts fall under long-term liabilities, future revenue pertains to unearned revenue or deferred income, and investments in physical assets refer to long-term assets or capital expenditures, which are not liabilities at all.

Get further explanation with Examzify DeepDiveBeta

Unpaid long-term debts

Future revenue from customers

Investments in physical assets

Next Question

Report this question

Download Certified Materials and Resource Professional Practice PDF Study Guide
Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy