Distinguish between fixed liability and current liability
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A. Current liabilities consist of only accounts payable to vendors and suppliers that fall due within the coming year (or within one operating cycle, if longer than a year). Long-term liabilities fall due beyond 1 year from the balance sheet date, or beyond the operating cycle (if longer than 1 year).
B. Current liabilities are obligations that fall due within the coming year (or within one operating cycle, if longer than a year). Long-term liabilities fall due beyond 1 year from the balance sheet date, or beyond the operating cycle (if longer than 1 year).
C. Current liabilities are obligations that fall due within between 1 and 3 years. Long-term liabilities fall due beyond 3 years from the balance sheet date.
D. Current liabilities consist of only bank loans that fall due within the coming year (or within one operating cycle, if longer than a year). Fixed liabilities are only bank loans that fall due beyond 1 year from the balance sheet date, or beyond the operating cycle (if longer than 1 year).
B. Current liabilities are obligations that fall due within the coming year (or within one operating cycle, if longer than a year). Long-term liabilities fall due beyond 1 year from the balance sheet date, or beyond the operating cycle (if longer than 1 year).
C. Current liabilities are obligations that fall due within between 1 and 3 years. Long-term liabilities fall due beyond 3 years from the balance sheet date.
D. Current liabilities consist of only bank loans that fall due within the coming year (or within one operating cycle, if longer than a year). Fixed liabilities are only bank loans that fall due beyond 1 year from the balance sheet date, or beyond the operating cycle (if longer than 1 year).
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A debt, bond or a loan that is payable over a term exceeding one year, is known as fixed liability, while current liability is that is which a debt, bond or a loan is payable in a short time, i.e., within the next one financial year.
Explanation:
Differences between Fixed Liability and Current Liability-
- Fixed liabilities have long repayment terms in excess of 1 year, while current liabilities have credit period of less than 12 months.
- Fixed liabilities appear in more than one balance sheet, while current liabilities appear in one balance sheet.
- Fixed liabilities have generally interest attached to them, while current liabilities have generally no interest attached.
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