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If there's a liability on the balance sheet on December 31st, but it's expected to be...

If there's a liability on the balance sheet on December 31st, but it's expected to be paid at the beginning of the next year. Is it a current or long term liability?

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Answer #1

Solution. The given question is a current liability.

Explanation: For an organization maintaining its book of accounts, liabilities are financial obligations that are to be paid within stipulated time period for sustaining changes/fluctuations and smooth run of business activities. If there's a liability on the balance sheet on 31st December and expected to be paid at the beginning of the next year, it comes under current liability as it is paid by the organization within one operating cycle of business whereas, long term liability accounts are amounts paid beyond one year of organization's operating cycle.

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