Which statement best describes current liabilities?

• A. Obligations due within 12 months
• B. Obligations due beyond 12 months
• C. Equity items
• D. Non-cash assets

Answer: (A)

Current liabilities are the obligations a company expects to settle in the near term. The key idea is to separate what will be paid soon from what is due later. In most definitions, current liabilities are due within 12 months (or within the operating cycle, if longer). This is why they appear as current obligations on the balance sheet, while obligations due after that period are long-term liabilities. Equity items are ownership claims, not obligations, and non-cash assets are assets, not liabilities. So the description that fits current liabilities is obligations due within 12 months.