A business still needs to pay their interest expenses. How is this classified for the business?
Understand the Problem
The question is asking how a business's obligation to pay interest expenses is categorized in accounting terms. It involves understanding the classification of liabilities and assets on a balance sheet.
Answer
Current Liability
The final answer is Current Liability
Answer for screen readers
The final answer is Current Liability
More Information
Interest expenses need to be paid within a year, classifying them as current liabilities on the balance sheet.
Tips
A common mistake is confusing interest expense classification with the operation of a business. It should be classified as a non-operating expense as well.
Sources
- Interest Expense Definition - Investopedia - investopedia.com
- Interest Expenses: How They Are Recorded On Income Statement - liveflow.io
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