A delivery company is creating a balance sheet. Which of the following would most likely be considered a short-term liability on this balance sheet?
A) the depreciation over the last year in the value of the vehicles owned by the company
B) revenue received for the delivery of items that have not yet been delivered
C) a loan which must paid back in two years
D) prepaid rent on the offices occupied by the company

Question

Quizplus · Accepted Answer

Revenue received for the delivery of items that have not yet been delivered is considered a short-term liability because the company has an obligation to deliver the items, and until that obligation is fulfilled, the revenue cannot be recognized as earned. A is incorrect because depreciation is not a liability, but an expense. C is incorrect because a loan is a long-term liability, not a short-term one. D is incorrect because prepaid rent is an asset, not a liability.

A Delivery Company Is Creating a Balance Sheet