What term describes debt that must be paid within 12 months, such as taxes or accounts payable?

• A. Short Term Liability
• B. Long Term Liability
• C. Current Asset
• D. Accrued Revenue

Answer: (A)

Short-term liability describes debts that must be settled within a year. Taxes payable and accounts payable fall into this category because they are obligations that require payment in the near term. On the balance sheet, these are shown as current liabilities, reflecting the need to use current assets to meet them within the coming year. This differs from long-term liabilities, which are due after more than a year, and from current assets, which are resources the company expects to convert into cash within a year. Accrued revenue is revenue that has been earned but not yet billed or collected, so it appears as an asset (a receivable) rather than a liability.