Question

Which of the following will most likely be recorded as a liability?

A: An asset conversion
B: An expense
C: A footnote
D: Revenue

Answer 1

The most likely option to be recorded as a liability is an asset conversion.

Step-by-step explanation:

The correct answer is A: An asset conversion.

An asset conversion is a transaction that results in the acquisition or disposal of an asset, such as selling an item of inventory. When an asset conversion occurs, it is recorded as a liability because it represents a future obligation or debt of the business. Liabilities are obligations or debts that a business owes to creditors or other parties.

For example, if a company sells inventory on credit, it creates a liability called accounts payable. This means that the company owes the buyer the value of the inventory until it is paid.