A current liability is a debt that can reasonably be expected to be paid between 6 months and 18 months. out of currently recognized revenues. out of cash currently on hand. within one year, or the operating cycle, whichever is longer.

Question

Ariel Castro

Business

19 May, 08:31

A current liability is a debt that can reasonably be expected to be paid between 6 months and 18 months. out of currently recognized revenues. out of cash currently on hand. within one year, or the operating cycle, whichever is longer.

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Xander Bailey · Answer 1

Current liabilities are debts that need to paid within the current financial year or the operating cycle. An operating cycle is the time business takes to convert purchased inventory to cash through sales. If the operating cycle is a short period, current debt will be paid before the end of the company year.

Examples of current liabilities include taxes payable, accounts payable, payroll, accrued expenses, dividends declared, and bank account overdrafts. In rare cases where the operating cycle takes longer than one year, current liabilities will be payable within the duration of the operating cycle.

Current liabilities are settled with current assets. The business needs to monitor both to ensure that the company is in a position to meet its obligations.