Which of the Following Is an Example of a Liability

question 6

Multiple Choice

Which of the following is an example of a liability?

• A)An amount which must be paid to a business that sold you some supplies
• B)The obligation to transfer the net assets of the business to its owners
• C)Equipment purchased by the business on a long-term payment plan
• D)The amount contributed to the business by your partner

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Definitions:

Profit and Loss Sharing

An arrangement, often in partnerships, where profits and losses are distributed among parties based on a pre-agreed ratio.

Final Settlement

The process of completing all financial transactions between parties, often referring to the final payment in a contract or dispute resolution.

Capital Accounts

Records reflecting the equity and investment contributions of owners or shareholders in a company, including adjustments for profits or losses.

Schedule of Liquidation

A detailed plan that outlines how a company will sell off its assets and pay off its liabilities before closing.