{"id":214654,"date":"2025-05-15T07:09:10","date_gmt":"2025-05-15T07:09:10","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=214654"},"modified":"2025-05-15T07:09:12","modified_gmt":"2025-05-15T07:09:12","slug":"short-term-liabilities-are-those-liabilities-that-will-be-paid-in-less-than-one-year","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/05\/15\/short-term-liabilities-are-those-liabilities-that-will-be-paid-in-less-than-one-year\/","title":{"rendered":"Short-term liabilities are those liabilities that will be paid in less than one year."},"content":{"rendered":"\n

Short-term liabilities are those liabilities that will be paid in less than one year.<\/p>\n\n\n\n

are due to be paid in 5 to 10 years
are due to be paid in more than one year
are liabilities owed to the owner and will never be paid<\/p>\n\n\n\n

The Correct Answer and Explanation is:<\/mark><\/strong><\/p>\n\n\n\n

The correct answer is:
Short-term liabilities are those liabilities that will be paid in less than one year.<\/strong><\/p>\n\n\n\n

\n\n\n\n

Explanation:<\/h3>\n\n\n\n

In accounting and finance, liabilities are classified based on the length of time before they are due for payment. The main categories are short-term liabilities<\/strong> (also called current liabilities) and long-term liabilities<\/strong>.<\/p>\n\n\n\n

Short-term liabilities<\/strong> are obligations that a company expects to settle within one year or within its operating cycle, whichever is longer. These include items like accounts payable (money owed to suppliers), short-term loans, accrued expenses, and taxes payable. The key characteristic of short-term liabilities is that the company must pay them in the near future, typically within 12 months. This classification helps both the company and external stakeholders assess the firm’s short-term liquidity\u2014its ability to meet immediate financial obligations.<\/p>\n\n\n\n

The other options are incorrect:<\/p>\n\n\n\n

    \n
  • “Are due to be paid in 5 to 10 years”<\/strong>: This describes a subset of long-term liabilities<\/strong>, which are obligations due beyond one year. Examples include long-term loans, bonds payable, and mortgages. These liabilities are not considered short-term because they do not need to be paid within the next 12 months.<\/li>\n\n\n\n
  • “Are due to be paid in more than one year”<\/strong>: This is the general definition of long-term liabilities<\/strong>. Long-term liabilities are critical for assessing a company\u2019s long-term solvency but are distinct from short-term liabilities.<\/li>\n\n\n\n
  • “Are liabilities owed to the owner and will never be paid”<\/strong>: This is inaccurate because liabilities represent debts or obligations to external parties, not the owner\u2019s equity. Owner\u2019s equity or capital represents the owner\u2019s claim on the business assets after liabilities are paid and is not classified as a liability. Also, liabilities are expected to be paid or settled; if something will never be paid, it would not be classified as a liability.<\/li>\n<\/ul>\n\n\n\n

    Understanding the distinction between short-term and long-term liabilities is essential for analyzing a company\u2019s financial health. Short-term liabilities impact working capital and liquidity ratios, such as the current ratio and quick ratio, which are used to determine if a business can cover its immediate debts. Long-term liabilities impact debt-to-equity ratios and long-term solvency.incorrect.<\/p>\n","protected":false},"excerpt":{"rendered":"

    Short-term liabilities are those liabilities that will be paid in less than one year. are due to be paid in 5 to 10 yearsare due to be paid in more than one yearare liabilities owed to the owner and will never be paid The Correct Answer and Explanation is: The correct answer is:Short-term liabilities are […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-214654","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/214654","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=214654"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/214654\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=214654"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=214654"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=214654"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}