Current liabilities are obligations whose liquidation is reasonably expected to require the use of existing current assets or the creation of other current liabilities within
A)one year or operating cycle, whichever is longer
B)one year
C)one year or operating cycle, whichever is shorter
D)an operating cycle

Question

Quizplus · Accepted Answer

According to generally accepted accounting principles (GAAP), current liabilities are those obligations that are reasonably expected to be settled within one year or the operating cycle of the business, whichever is longer. This means that if a business has a longer operating cycle, such as a manufacturing company with a cycle of more than one year, then the one-year timeline would not apply and the obligation would be classified as a current liability if it is expected to be settled within the operating cycle. Therefore, choice A is the correct answer.

Current Liabilities Are Obligations Whose Liquidation Is Reasonably Expected to Require