Question

Within the current liabilities section, how do you believe the accounts be listed? Defend your position.

Short answer

The order by which current liabilities can be listed changes from company to company. However, the accounts under the current liabilities can be listed in ways such as according to maturity, according to the amount, and in order of liquidity preference.

Step-by-step solution

Definition of Current Liabilities

Current liabilities are the liabilities that are payable in an accounting year. These are created either out of realization from current assets or by the creation of fresh current liability.

Listing of accounts under current liabilities section

Accounts can be listed within current liabilities in the following ways:

• In order of maturity: Accounts within the current liabilities section are recorded in order of maturity as accounts payable, notes payable, and accrued expenses.

• According to amount: Accounts within the current liabilities section are listed on the balance sheet and are paid from the revenue earned from the operating activities of a company.

• In order of liquidity: Current liabilities listed on the liabilities are sorted by the time it takes to pay off its debts. Current liabilities can be listed in the order of liquidity, such as short-term notes payable, current portions of long-term debt, accounts payable, payroll-related liabilities, other accrued expenses, and income taxes were payable.

Thus, the listing of accounts within the current liabilities section is done in the above ways.