Which of the following items is a current liability?
Question 1 Report
Which of the following items is a current liability?
Answer Details
The current liability item is Bills payable.
A liability is an obligation that a company owes to another party, which could be a debt or a promise to pay. A current liability is a debt that is expected to be paid off within a year or a company's operating cycle, whichever is longer.
In this case, bills payable are the amount of money that a company owes to its suppliers for goods or services purchased on credit. Since bills payable are expected to be paid off within a year, they are classified as a current liability.
On the other hand, stock of raw material, cash in hand, and cash at bank are not current liabilities. Stock of raw material is an inventory asset, while cash in hand and cash at bank are cash and cash equivalents that are classified as current assets.
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