Question

U.S. standards require a classified balance sheet with liabilities classified as either current or long term.

a) True
b) False

Answer 1

The given statement "U.S. standards require a classified balance sheet with liabilities classified as either current or long term." is a) True

Explanation:

In the United States, according to Generally Accepted Accounting Principles (GAAP), a classified balance sheet is a standard practice for reporting a company's financial position. This involves classifying liabilities into current and long-term categories.

Current liabilities are obligations expected to be settled within one year or the operating cycle, whichever is longer. Long-term liabilities are obligations not expected to be settled within the operating cycle or within one year. The classification helps in providing a clearer snapshot of a company's short-term obligations versus those extending beyond a year.

The classified balance sheet structure aids investors, creditors, and stakeholders in understanding a company's financial health by presenting a clear distinction between short-term and long-term obligations.

This distinction is vital for assessing a company's liquidity, solvency, and its ability to meet its financial obligations in the short and long term. Additionally, it provides crucial information for decision-making, such as assessing a company's ability to repay short-term debts without disrupting its normal operations and evaluating its overall financial stability. Hence, the requirement for liabilities to be classified as current or long term is a standard practice in U.S. accounting and financial reporting.

Answer 2

Yes, U.S. standards require a classified balance sheet with liabilities classified as either current or long term.a) True

Step-by-step explanation:

In the United States, generally accepted accounting principles (GAAP) require the classification of liabilities on a balance sheet as either current or long term.

Current liabilities are obligations expected to be settled within a year or within the operating cycle, whichever is longer. Long-term liabilities, on the other hand, are obligations due beyond that one-year period or operating cycle. This classification is crucial as it provides insight into a company's financial health, liquidity, and obligations.

By segregating liabilities into these categories, stakeholders can assess the company's short-term and long-term financial obligations. This classification system enables better analysis and decision-making regarding a company's financial position and its ability to meet its obligations in the short and long term.