What is the key distinction between current and non-current liabilities?
A)Current liabilities always have lower balances than non-current liabilities.
B)Non-current liabilities always increase over time.
C)Non-current liabilities are permanent debts of the business.
D)Current liabilities will be paid off within one year or one operating cycle.

Question

Quizplus · Accepted Answer

The key distinction between current and non-current liabilities is that current liabilities are debts that are expected to be paid off within one year or one operating cycle, whichever is longer. Non-current liabilities are debts that are not due within one year or one operating cycle and are considered long-term liabilities. Therefore, option D is the correct answer. Option A is not correct because the balances of current and non-current liabilities can vary depending on the circumstances. Option B is also not correct because non-current liabilities can decrease or remain the same over time. Option C is not correct because non-current liabilities may not necessarily be permanent debts of the business as they can be refinanced or paid off earlier through various means.

What Is the Key Distinction Between Current and Non-Current Liabilities