Question

Which of the following is an example of an accrued liability?

1) Accounts payable
2) Notes payable
3) Prepaid insurance
4) Product warranty liability

Answer 1

An accrued liability in the provided options is product warranty liability, which represents an estimated future expense that the company will likely incur as a result of current sales.

Step-by-step explanation:

Accrued liabilities are expenses that have been incurred but not yet paid. Among the options provided: accounts payable, notes payable, prepaid insurance, and product warranty liability, the example of an accrued liability is product warranty liability.

Accounts payable represents short-term obligations to pay suppliers for products or services already received. Notes payable are formal written agreements to repay borrowed money. Prepaid insurance is an asset representing insurance payments made in advance for future coverage. In contrast, product warranty liability is an estimated liability, where a company expects to pay out in the future for the products it has sold. It is a contingent obligation that depends on the occurrence of future events, specifically when the product might have to be repaired or returned under warranty.