A probable future sacrifice of an economic benefit arising from a present obligation to transfer assets or provide services to other entities in the future as a result of a past transaction is a/an
A)asset.
B)liability.
C)equity.
D)expense.

Question

Quizplus · Accepted Answer

The situation described in the question is that of a future sacrifice of an economic benefit arising from a present obligation to transfer assets or provide services to other entities in the future. This is the definition of a liability, which means an obligation that a company owes to others and will likely result in an outflow of resources. Therefore, the correct answer is B, liability. Choice A (asset) refers to something owned by a company that has value and generates future economic benefits; choice C (equity) refers to the residual interest in the assets of a company after deducting liabilities; and choice D (expense) refers to costs incurred to generate revenue or to maintain operations, and is not applicable in this situation.

A Probable Future Sacrifice of an Economic Benefit Arising from a Present