| LO1 - Identify and explain the difference between current and non-current liabilities. |
Current or short-term liabilities are a form of debt that is expected to be paid within the longer of one year of the balance sheet date or the next operating cycle, whichever is longer. Examples include accounts payable, salaries payable, unearned revenues, notes payable, and short-term bank loans.
Non-current liabilities are forms of debt expected to be paid beyond one year of the balance sheet date or the next operating cycle, whichever is longer. Long-term bank loans secured by real estate (mortgages) are examples of non-current liabilities.
As discussed in Chapter 4, current and non-current liabilities must be shown separately on the balance sheet. Doing so helps financial statement readers assess the liquidity of a corporation – its ability to satisfy current liabilities (generally with cash) as they come due.
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