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Chapter 11: Q1RQ (page 603)

What are the three main characteristics of liabilities?

Short Answer

Expert verified

Liability is amonetary burdenon an individual or a business entity that will be paid in the future.

Step by step solution

01

Meaning of Liabilities

A liability is an obligation owed by a person or a business, typically in the form of money. Over time, the liabilities will resolve by transmitting economic advantages like money, products, or services.

02

Characteristics of liabilities

Liabilities often have three characteristics:

They happen as a result of a previous transaction or occurrence.

It establishes a present liability for future cash or service payments.

Liabilities are an unavoidable burden.

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Most popular questions from this chapter

How is the times-interest-earned ratio calculated, and what does it evaluate?

How is the times-interest-earned ratio calculated, and what does it evaluate?

What is a contingent liability? Provide some examples of contingencies.

Rios Raft Company had the following liabilities.

a. Accounts Payable

b. Note Payable due in 3 years

c. Salaries Payable

d. Note Payable due in 6 months

e. Sales Tax Payable

f. Unearned Revenue due in 8 months

g. Income Tax Payable

Determine whether each liability would be considered a current liability (CL) or a long-term liability (LTL).

What is contingent liability? Provide some examples of contingencies.
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