Liabilities are present obligations (not potential or future obligations) that arise from past events and require the entity to transfer resources (usually cash or goods) in the future. This definition excludes deferred credits (choice B) and future obligations to transfer ownership shares (choice C). Choice A is incorrect as it doesn't fully capture the concept and is too narrow.

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Liabilities Are

Question 25

Multiple Choice

Liabilities are

A) any accounts having credit balances after closing entries are made.
B) deferred credits that are recognized and measured in conformity with generally accepted accounting principles.
C) obligations to transfer ownership shares to other entities in the future.
D) present obligations arising from past events and results in an outflow of resources.

Correct Answer: