Question

The key distinction between current liabilities and long-term liabilities is:
a. The amount of the obligation to be satisfied—large versus small
b. To whom the obligation is owed—those inside versus those outside of the company
c. The length of time until the obligation is expected to be satisfied—less than one year versus more than one year, or operating cycle if longer
d. The nature of the obligation—determinable amount versus estimated amount

Answer 1

Answer: Option C

Explanation: Current liabilities can be defined as those obligations of the company that are to be satisfied within one year or one operating cycle.

On the other hand, long term liabilities are those obligations which are due in a longer time period, that is, more than a year or operating cycle.

Thus, from the above we can conclude that right answer is Option c.