AFE Quiz 14: Liabilities – Accounting for Everyone

Which of the following best defines a liability?

An economic resource owned by a company
An obligation to transfer assets or provide services in the future
An owner’s investment in the company
A company’s net income

Which of the following is considered a current liability?

Bonds Payable (due in 10 years)
Mortgage Payable
Accounts Payable
Equipment

Which of the following is NOT a liability?

Unearned Revenue
Notes Payable
Prepaid Insurance
Salaries Payable

Liabilities are typically reported on which financial statement?

Income Statement
Statement of Cash Flows
Balance Sheet
Statement of Owner’s Equity

Which of the following is a long-term liability?

Accounts Payable
Notes Payable (due in 5 years)
Interest Payable
Salaries Payable

What happens to liabilities when a company pays off a loan?

Liabilities increase
Liabilities decrease
No effect on liabilities
Owner’s equity decreases

What is the effect of recording an accrued expense?

Assets increase
Liabilities increase
Owner’s equity increases
Revenues increase

Which of the following is an example of an accrued liability?

Prepaid Rent
Salaries Payable
Accounts Receivable
Equipment

Which of the following would NOT be classified as a liability on the balance sheet?

Unearned Revenue
Accounts Payable
Common Stock
Notes Payable

Which of the following best describes the normal balance of a liability account?

Debit
Credit
Debit and Credit
None of the above