Which of the following is an example of a liability on a balance sheet?

Which of the following is an example of a liability on a balance sheet?

• A. Cash
• B. Property
• C. Equipment
• D. Loans

Answer: (D)

A liability on a balance sheet refers to a company's financial obligations or debts that it owes to outside parties. Loans represent borrowed funds that the company must repay in the future, making them a clear example of a liability. This can include bank loans, mortgages, or any other types of borrowed money that require repayment along with interest. In contrast, cash, property, and equipment are considered assets. Cash is a current asset because it is liquid and can be used immediately for business operations. Property and equipment are fixed assets, as they provide long-term benefits to the company but are not obligations that require repayment. Understanding these distinctions is crucial in financial reporting, as they help assess a company's financial health and operational efficiency.

A liability on a balance sheet refers to a company's financial obligations or debts that it owes to outside parties. Loans represent borrowed funds that the company must repay in the future, making them a clear example of a liability. This can include bank loans, mortgages, or any other types of borrowed money that require repayment along with interest.

In contrast, cash, property, and equipment are considered assets. Cash is a current asset because it is liquid and can be used immediately for business operations. Property and equipment are fixed assets, as they provide long-term benefits to the company but are not obligations that require repayment. Understanding these distinctions is crucial in financial reporting, as they help assess a company's financial health and operational efficiency.