How long are Current Liabilities held for?

How long are Current Liabilities held for?

• A. Held for less than 12 months - expected to be paid within a year
• B. Held for more than 12 months
• C. Indefinitely
• D. Within 2 years

Answer: (A)

Current liabilities are obligations the business expects to settle within 12 months. This short timeframe makes them part of the company’s working capital and reflects its immediate liquidity needs. Examples include supplier invoices and short-term loans that are due within a year. If a liability is due after more than 12 months, it’s considered non-current (long-term). A liability that would be settled within two years or has an indefinite due date isn’t current because it isn’t expected to be paid within a year. So, the idea is that current liabilities are held for less than 12 months, to be paid within a year.

Current liabilities are obligations the business expects to settle within 12 months. This short timeframe makes them part of the company’s working capital and reflects its immediate liquidity needs. Examples include supplier invoices and short-term loans that are due within a year. If a liability is due after more than 12 months, it’s considered non-current (long-term). A liability that would be settled within two years or has an indefinite due date isn’t current because it isn’t expected to be paid within a year. So, the idea is that current liabilities are held for less than 12 months, to be paid within a year.