Obligations of an entity or outsiders' claims against the entity's assets are called what?

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Study for the ACFE Accounting Terms Test with interactive quizzes. Prepare with multiple choice questions, each question accompanied by explanations and hints. Ensure your success with our study materials!

Multiple Choice

Obligations of an entity or outsiders' claims against the entity's assets are called what?

Explanation:
Liabilities are obligations of the entity to transfer assets or provide services to outsiders. They arise from past events and require a future outflow of resources, creating a claim by creditors against the entity’s assets. Examples include accounts payable, notes payable, accrued expenses, and bonds payable. This concept is distinct from assets (resources the entity owns), equity (the owners’ residual interest after liabilities), and revenue (inflows from operating activities). The term that fits the description is liabilities.

Liabilities are obligations of the entity to transfer assets or provide services to outsiders. They arise from past events and require a future outflow of resources, creating a claim by creditors against the entity’s assets. Examples include accounts payable, notes payable, accrued expenses, and bonds payable. This concept is distinct from assets (resources the entity owns), equity (the owners’ residual interest after liabilities), and revenue (inflows from operating activities). The term that fits the description is liabilities.

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