ACCA Financial Accounting (F3) Exam Practice 2025 – Complete Prep Resource

Question: 1 / 400

Which of the following best describes current liabilities?

Obligations that are expected to be settled in more than one year

Obligations assessable through non-cash methods

Obligations expected to be settled within one year

Current liabilities are best described as obligations expected to be settled within one year. This definition is fundamental in financial accounting, as it helps users of financial statements understand a company's short-term financial health and liquidity. Current liabilities typically include items such as accounts payable, short-term loans, and accrued expenses, which require the business to use its current assets to settle these debts within the upcoming operating cycle or one year, whichever is longer.

This classification of liabilities is crucial for assessing a company’s ability to meet its short-term obligations, which in turn can affect its creditworthiness and operational efficiency. Understanding current liabilities is essential for stakeholders to gauge how effectively a business can manage its cash flow and financial responsibilities in the near term.

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Obligations that generate interest revenue

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