Current Liabilities And Long Term Liabilities

1075 Words Jul 28th, 2016 5 Pages
What is a current liability? From the perspective of a user of financial statements, why do you believe current liabilities are separated from long-term liabilities? Based on your current experience as well as any additional research you may have done, provide two examples of situations where businesses collect monies from customers and employees and report these amounts as a current liability. Current liabilities are “obligations that must be settled within 1 year or the operating cycle, whichever is longer” and are “usually satisfied by transferring a current asset.” (). It includes accounts payable; short-term notes payable, income tax payable, accrued expenses, and portion on long-term debt payable. Long-term liabilities are different from current liabilities because it is not due within one year of the balance sheet. Some of the examples of long-term liabilities are bonds payable, long-term loans, capital leases, pension liabilities, postretirement healthcare liabilities, deferred compensation, deferred revenues, deferred income taxes, and derivative liabilities. It is important to keep current liabilities separate from long-term liabilities in order to get an accurate view of your current asset and to keep track of which liabilities should be accomplish first. Knowing which liabilities are due with a year and the amount of assets turning to cash within one year are import to lenders, financial analysts, owners, and executives of the company. Examples of current…
Open Document