CFA Practice Question

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CFA Practice Question

Liabilities are ______

A. any accounts having credit balances on the balance sheet
B. obligations to transfer ownership shares to other entities in the future
C. obligations arising from past transactions and payable in assets or services in the future.
D. a contractual obligation, such as a purchase order issued for a specific item of inventory or equipment to be delivered in the future.
Correct Answer: C

In order to be classified as a liability, three conditions must be met: entails future sacrifice of assets, constitutes a present obligation, and results from past transaction.

User Contributed Comments 5

User Comment
pappoo Why not D is also correct?
poomie83 It is a sale resulting in decrease of inventory and increase in revenue and accounts receivable
gill15 Isnt D an increase in Unearned Revenue which is a liability?
Or is it not considered in this case because it is just contractual and no money has been transferred from on to the other?
ddrmax @gill, that's correct. contractual is the key
Shaan23 Gill - could pick up on that. Would not have thought of that. Way to read all the choices.
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