Question

In: Accounting

What differentiates a current liability from a long-term liability? Share at least two examples of each....

What differentiates a current liability from a long-term liability? Share at least two examples of each. What are the differences in accounting for these two types of liabilities?

Expert Solution

Answer :-

Difference between current liabilities and long term liabilities

Current Liabilities are obligations due with in one year or the normal operating cycle of the business, which ever is longer

Long Term Liabilities or Non Current Liabilities are debts of the business that are due beyond one year or normal operating cycle

In simple terms the major difference between current liabilities and long term liabilities is Time difference

Examples of current liabilities

1. Interest received in advance

2. Unpaid dividends

3. Loans repayable on demand

4. Accounts payable

5. Notes Payable

6. Interest accrued but not paid

Examples of Long term liabilities

1. Bonds/Debentures

2. Term Loans

3. Long term maturity of finance lease obligations

4. Long term deposits

Difference in accounting

The only difference between the Long term liabilities and current liabilities is , items of long term liabilities shown separately under the head Non current liabilities where as the items of current liabilities shown separately under the head current liabilities Balance Sheet

ekkarill92 answered 2 years ago

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