Which statement about current liabilities is true?

Which statement about current liabilities is true?

• A. Due within one year
• B. Due beyond one year
• C. Include long-term debt
• D. Are always cash-based

Answer: (A)

Current liabilities are obligations that a company expects to settle in the near term, typically within one year or the operating cycle, whichever is longer. The statement that is true reflects this timing: being due within one year fits the definition of current liabilities. The other ideas describe different concepts. A claim due beyond one year belongs to long-term liabilities, not current. Long-term debt is a long-term liability and is not included in current liabilities. And current liabilities are not necessarily cash-based; while many are settled with cash, they can also be settled by other current assets or through noncash arrangements, so the statement that they are always cash-based isn’t correct.

Current liabilities are obligations that a company expects to settle in the near term, typically within one year or the operating cycle, whichever is longer. The statement that is true reflects this timing: being due within one year fits the definition of current liabilities.

The other ideas describe different concepts. A claim due beyond one year belongs to long-term liabilities, not current. Long-term debt is a long-term liability and is not included in current liabilities. And current liabilities are not necessarily cash-based; while many are settled with cash, they can also be settled by other current assets or through noncash arrangements, so the statement that they are always cash-based isn’t correct.