Question

Are the below current liabilities?

1) Accounts payable
2) loan payable
3) Interest payable
4) Reserve for returns
5) Note payable

Answer 1

Yes, all the items listed are current liabilities. They represent short-term financial obligations that a company is expected to settle within one year or an operating cycle, including accounts and loans payable, interest payable, reserves for returns, and notes payable.

Step-by-step explanation:

Current Liabilities Explanation

Current liabilities are a company's short-term financial obligations that are due within one year or within the operating cycle. The items you've listed can be classified as current liabilities:

1. Accounts payable: Money owed by a company to its suppliers or vendors for goods and services received. Definitely a current liability.
2. Loan payable: Any borrowed money that must be repaid within one year is a current liability.
3. Interest payable: The interest expense that has been incurred on outstanding debt but has not yet been paid is a current liability.
4. Reserve for returns: An amount set aside to cover potential product returns, which is a current liability since it represents an obligation that the company expects to settle in the near future.
5. Note payable: Similar to a loan payable, it is an obligation in the form of a written promissory note that is due within one year.