Subscription received in advance during the current year is
(a) An income
(b) An asset
(c) A liability
(d) None of the above
Answers
Answer:
Answer: A liability
......
Answer:
A liability
Subscription received in advance during the current year is a liability. The Not-for-Profit Organization is liable for subscriptions received in advance during the year.
Explanation:
A liability is something a person or company owes, usually a sum of money. Liabilities are settled over time through the transfer of economic benefits including money, goods, or services.
Recorded on the right side of the balance sheet, liabilities include loans, accounts payable, mortgages, deferred revenues, bonds, warranties, and accrued expenses.
Liabilities can be contrasted with assets. Liabilities refer to things that you owe or have borrowed; assets are things that you own or are owed.
KEY TAKEAWAYS
A liability (generally speaking) is something that is owed to somebody else.
Liability can also mean a legal or regulatory risk or obligation.
In accounting, companies book liabilities in opposition to assets.
Current liabilities are a company's short-term financial obligations that are due within one year or a normal operating cycle (e.g. accounts payable).
Long-term (non-current) liabilities are obligations listed on the balance sheet not due for more than a year.
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What's a Liability?
How Liabilities Work
In general, a liability is an obligation between one party and another not yet completed or paid for. In the world of accounting, a financial liability is also an obligation but is more defined by previous business transactions, events, sales, exchange of assets or services, or anything that would provide economic benefit at a later date. Current liabilities are usually considered short-term (expected to be concluded in 12 months or less) and non-current liabilities are long-term (12 months or greater).
Liabilities are categorized as current or non-current depending on their temporality. They can include a future service owed to others (short- or long-term borrowing from banks, individuals, or other entities) or a previous transaction that has created an unsettled obligation. The most common liabilities are usually the largest like accounts payable and bonds payable. Most companies will have these two line items on their balance sheet, as they are part of ongoing current and long-term operations.
Liabilities are a vital aspect of a company because they are used to finance operations and pay for large expansions. They can also make transactions between businesses more efficient. For example, in most cases, if a wine supplier sells a case of wine to a restaurant, it does not demand payment when it delivers the goods. Rather, it invoices the restaurant for the purchase to streamline the drop-off and make paying easier for the restaurant.
The outstanding money that the restaurant owes to its wine supplier is considered a liability. In contrast, the wine supplier considers the money it is owed to be an asset.
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