Which of the following statements is true of liabilities?
A) Accounts payable are listed in the current liabilities section in alphabetical order by vendor.
B) Classification of current liabilities is important because of the liquidity concept.
C) Current liabilities are listed in order of decreasing amounts in the current liability section of the balance sheet.
D) The accounting principles followed in the U.S.differ from those of other countries; this is especially true for current liabilities.

Question

Quizplus · Accepted Answer

Classification of current liabilities is important in order to provide information about the company's short-term obligations and ability to meet those obligations with its current assets. The liquidity concept refers to the ability to convert assets into cash in a short period of time to meet liabilities as they come due. Therefore, it is important for current liabilities to be listed in the order of their due dates, with the closest due dates listed first. Alphabetical order by vendor is not necessary, and current liabilities are not necessarily listed in order of decreasing amounts. The accounting principles followed in the U.S. may differ from those of other countries, but this is not specifically true for current liabilities.

Which of the Following Statements Is True of Liabilities