Which items are liabilities?

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Multiple Choice

Which items are liabilities?

Explanation:
Liabilities are obligations that will require an outflow of resources in the future. On a balance sheet these are split into current liabilities (due within one year) and long-term liabilities (due after one year). The choice that includes both current and long-term liabilities correctly captures what counts as liabilities. The other options describe items that are assets (resources the company owns) or shareholders’ equity (the owners’ claim after liabilities are settled), not obligations themselves. For example, accounts payable and loans payable are liabilities, while cash or equipment are assets, and owners’ equity represents the residual interest of the owners.

Liabilities are obligations that will require an outflow of resources in the future. On a balance sheet these are split into current liabilities (due within one year) and long-term liabilities (due after one year). The choice that includes both current and long-term liabilities correctly captures what counts as liabilities. The other options describe items that are assets (resources the company owns) or shareholders’ equity (the owners’ claim after liabilities are settled), not obligations themselves. For example, accounts payable and loans payable are liabilities, while cash or equipment are assets, and owners’ equity represents the residual interest of the owners.

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