A liability has three essential characteristics. Which of the following is not one of them?
A) It is a present obligation that entails settlement by probable future transfer or use of cash, goods, or services.
B) The obligation must be liquidated using cash, goods, or services that were earned by the entity in the performance of its normal business operation.
C) The liability must be an unavoidable obligation.
D) The transaction or other event creating the obligation must have already occurred.

Question

Quizplus · Accepted Answer

The correct characteristics of a liability include it being a present obligation that will likely require the transfer of resources embodying economic benefits in the future, the obligation must be unavoidable, and the transaction or event creating the obligation must have already occurred. The requirement that the obligation must be liquidated using resources earned in the normal course of business (choice B) is not a necessary characteristic of a liability.

A Liability Has Three Essential Characteristics