Which accounts are classified as current liabilities?

Which accounts are classified as current liabilities?

• A. Salaries payable, taxes payable, accounts payable
• B. Notes payable due in more than a year
• C. Long-term investments
• D. Common stock

Answer: (A)

Current liabilities are obligations a business expects to settle within one year or the operating cycle. Salaries payable reflect wages earned but not yet paid, taxes payable are taxes owed but not yet remitted, and accounts payable are amounts owed to suppliers. These are all settled in the near term, so they fit the classification. In contrast, notes payable due in more than a year is a long-term liability, long-term investments are assets, and common stock is equity. Thus the first set—salaries payable, taxes payable, and accounts payable—are the current liabilities.

Current liabilities are obligations a business expects to settle within one year or the operating cycle. Salaries payable reflect wages earned but not yet paid, taxes payable are taxes owed but not yet remitted, and accounts payable are amounts owed to suppliers. These are all settled in the near term, so they fit the classification. In contrast, notes payable due in more than a year is a long-term liability, long-term investments are assets, and common stock is equity. Thus the first set—salaries payable, taxes payable, and accounts payable—are the current liabilities.