- CFA Exams
- CFA Level I Exam
- Study Session 7. Financial Reporting and Analysis (2)
- Reading 22. Understanding Balance Sheets
- Subject 1. Components and Format of the Balance Sheet
CFA Practice Question
When credit is granted to a company by its suppliers and employees, the balance sheet classification is called ______.
A. short-term debt
B. current portion of long-term debt
C. operating and trade liabilities
Explanation: Operating and trade liabilities, and advances from customers, are consequences of operating activities.
User Contributed Comments 3
| User | Comment |
|---|---|
| schweitzdm | When would an employee grant credit to the company they work for? |
| janis36 | By allowing the company to pay salary for previous month on the next month the employee is effectively granting a credit to the company it works for. |
| lighty0770 | when credit is granted by suppliers sounds very very similar to converting AP to a note payable which is generally classified as short-term debt. Is there an LOS this is in or this classification is pulled directly from the material because I would argue A is also correct. |