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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Define a liability. What are the three characteristics of a liability?

To determine

Define a liability and indicate the three characteristics of a liability.

Explanation

Liability

Liability is a financial obligation made by a company to pay certain amount for the goods or services received by the company in the past. A liability is one of the three elements of accounting equation or balance sheet equation.

The following are the two categories of liabilities reported in the balance sheet:

  • Current Liabilities
  • Long-term Liabilities

Current Liabilities: The short-term legal agreements which are required to be paid within one year are referred as current liabilities.

Long-term Liabilities: The liabilities which have a longer maturity period (more than one year) are referred as long-term liabilities...

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