Which of the Following Statements Regarding Liabilities Is True

question 19

Multiple Choice

Which of the following statements regarding liabilities is true?

• A)Liabilities must be legally enforceable to a known recipient.
• B)Liabilities arise from past activities that require some future sacrifice of economic benefits.
• C)The accounting principles followed in the U.S. require that current liabilities be listed in order of decreasing amounts on the balance sheet.
• D)The accounting principles followed in the U.S. differ substantially from those of other countries, especially with respect to current liabilities.

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Definitions:

Physical Inventory

A detailed listing of merchandise on hand.

Perpetual Inventory System

A method that continuously updates inventory records to reflect sales, returns, and additions in real time.

Perpetual Inventory System

An inventory management system where stock levels are updated in real-time following each purchase or sale.

Inventory Account

An account used to record the value of inventory held by a business, including goods ready for sale and those in the process of being produced.