Question

liabilities are debts that will be paid within the next 12 months.

a returned
b current
c paid
d settled

Explanation:

🆕 New Concept Discovered: Classification of Liabilities
Short-term obligations vs. long-term debts.

Step 1: Define the core accounting terms

In financial accounting, liabilities (debts or obligations owed to outside parties) are classified into two main categories based on their settlement timeframe:

• Current Liabilities: Obligations that are expected to be settled, paid, or resolved within one year (12 months) or within the normal operating cycle of the business, whichever is longer.
• Non-Current (Long-Term) Liabilities: Obligations that are due beyond one year or one operating cycle.

Step 2: Match the definition with the options

The question asks for the term that completes the sentence:

"\_\_\_\_\_\_\_\_\_\_\_\_\_\_ liabilities are debts that will be paid within the next 12 months."

• A. Returned: Not a standard accounting classification for liabilities.
• B. Current: Matches the definition of short-term obligations due within 12 months.
• C. Paid: Refers to the status of a liability, not its classification category.
• D. Settled: Refers to the action of clearing a debt, not its classification category.

Therefore, the correct term is Current.

Answer:

B. Current