Which describes current liabilities?

Which describes current liabilities?

• A. short-term financial obligations due usually within a year or a normal operating cycle.
• B. financial obligations not expected to be paid within one year.
• C. a company or group of people authorized to act as a single entity.
• D. cost of the next best alternative use of money.

Answer: (B)

Current liabilities are short-term financial obligations that a company expects to settle within one year or within its normal operating cycle. This timing matters because it helps assess liquidity—how readily the business can cover its near-term obligations with its available short-term assets. Typical examples include accounts payable, short-term debt, and accrued expenses like wages or taxes payable, as well as the current portion of long-term debt. Describing liabilities not expected to be paid within one year refers to long-term liabilities, which are obligations due after more than a year. The other choices describe concepts outside liabilities: one points to the legal form of a business entity, and the other to the concept of opportunity cost—the next best alternative use of money.

Current liabilities are short-term financial obligations that a company expects to settle within one year or within its normal operating cycle. This timing matters because it helps assess liquidity—how readily the business can cover its near-term obligations with its available short-term assets. Typical examples include accounts payable, short-term debt, and accrued expenses like wages or taxes payable, as well as the current portion of long-term debt.

Describing liabilities not expected to be paid within one year refers to long-term liabilities, which are obligations due after more than a year. The other choices describe concepts outside liabilities: one points to the legal form of a business entity, and the other to the concept of opportunity cost—the next best alternative use of money.