Q16RQ - Horngren'S Financial And Managerial Accounting

Question

What are the two categories of liabilities reported on the balance sheet? Provide

examples of each.

Step-by-Step Solution

Answer

Liabilities are classified into current and long-term liabilities.

Step 1: Definition of liabilities

Liabilities are the legal obligation or debt payable by the company.

Step 2: Two categories of liabilities

The two categories of the liabilities are current liabilities and long-term liabilities:

Current Liabilities: Current liabilities are those liabilities that become due within one year. For example- accounts payable, short-term notes payable, etc.

Long-term liabilities: Long-term liabilities are those liabilities that become due in more than one year. For example- long-term loans, bonds, notes payable, etc.