Which of the following statements best describes a liability?
A) Any obligation, whether enforceable or not, is a liability.
B) A liability is an enforceable economic burden or obligation.
C) A liability is a legal economic benefit.
D) Deferred income taxes are always shown as liabilities.

Question

Quizplus · Accepted Answer

A liability is a legal obligation or financial burden that an entity owes to another entity. For a liability to exist, it must be enforceable, meaning that the creditor has legal recourse if the debtor fails to meet its obligation. Therefore, statement B best describes a liability. Statement A is partially correct, but a liability must be enforceable to be recognized. Statement C is incorrect because an economic benefit is an asset, not a liability. Statement D is incorrect because deferred income taxes can be either an asset or a liability depending on the circumstances.

Which of the Following Statements Best Describes a Liability