Quiz 13.01 – T/F Types of Liabilities
Intermediate Accounting
Spiceland, Nelson, and Thomas
10th Edition
Not all liabilities are contractual and may not be settled with cash.
Not all liabilities are contractual and may not be settled with cash.
An arrangement with a bank or group of banks for long-term funding is known as a line of credit.
Funds deducted from employees’ paychecks for payroll purposes may represent liabilities that need to be paid to third parties.
When a product or service is provided, a customer advance liability is fulfilled.
Gift card revenue is recognized immediately upon sale, instead of being deferred.
If a creditor can demand repayment of long-term debt within the next year, the debt should be classified as a current liability only if it is anticipated to be called.
When obligations are expected to be refinanced, the principle of substance over form affects their classification.
According to IFRS, a liability that undergoes refinancing between the balance sheet date and the issuance of financial statements is usually classified as a current liability.
When a product subject to a quality-assurance warranty is sold, the expense and liability for the warranty are recognized in the same reporting period.
The recognition of a loss contingency requires that the claim is made before the end of the accounting period.