Under generally accepted accounting principles,an item must clearly represent a commitment to pay out funds in the future in order to be classified as a liability.

Question

Quizplus · Accepted Answer

According to generally accepted accounting principles, a liability is defined as an obligation to transfer economic resources to another entity in the future, resulting from a past transaction or event. In order to be classified as a liability, it is necessary for an item to represent a present obligation to pay out funds in the future. Therefore, the statement is true.

Under Generally Accepted Accounting Principles,an Item Must Clearly Represent a Commitment