What are Liabilities - Financial Accounting

The video tutorial explains liabilities as part of claims, emphasizing that liabilities are what a business owes. It covers examples such as accounts payable, notes payable, and unearned revenue, highlighting the difference between payables and receivables. Unearned revenue is discussed in detail, illustrating how it transitions to earned revenue once the service or product is delivered. The tutorial concludes by summarizing the nature of liabilities and their role in financial obligations.

What is the primary characteristic of liabilities?

• They are the equity held by shareholders.

• They are the profits earned by the business.

• They are assets owned by the business.

• They are amounts owed to others.

Which of the following is NOT an example of a liability?

• Accounts receivable

• Salaries payable

• Notes payable

• Accounts payable

How can you differentiate between payables and receivables?

• Payables are expected payments, and receivables are expected receipts.

• Both are expected payments.

• Both are expected receipts.

• Payables are expected receipts, and receivables are expected payments.

What does unearned revenue represent?

• A type of asset

• A product or service already delivered

• A future obligation to deliver a product or service

• An immediate cash inflow

When does unearned revenue become earned revenue?

• When the cash is received

• When the product or service is delivered

• When the business incurs a loss

• When the liability is recorded