How are liabilities usually classified on a classified balance sheet?

• A. As accrued and deferred liabilities
• B. As tangible and intangible liabilities
• C. As operating and non-operating liabilities
• D. As current liabilities and long-term liabilities

Answer: (D)

Verified step by step guidance

1. Understand the concept of a classified balance sheet: A classified balance sheet organizes assets, liabilities, and equity into subcategories to provide a clearer financial picture.
2. Focus on liabilities: Liabilities represent obligations the company owes to external parties, such as creditors or suppliers.
3. Learn the classification criteria: Liabilities are typically divided into two main categories based on their due dates—current liabilities and long-term liabilities.
4. Define current liabilities: These are obligations expected to be settled within one year or the operating cycle, whichever is longer. Examples include accounts payable, short-term loans, and accrued expenses.
5. Define long-term liabilities: These are obligations that are not expected to be settled within one year or the operating cycle. Examples include bonds payable, long-term leases, and pension obligations.