Question

multiple choice question
which of the following statements is the correct definition of a liability?

a liability is a claim against a customer who is delinquent in paying their bill.
a liability is a something of value owned by a business.
a liability is a claim by a creditor against the assets of a business.
a liability is recorded when money is earned by the business.

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Explanation:

• The first option describes an accounts receivable, not a liability.
• The second option defines an asset, not a liability.
• The fourth option refers to revenue recognition, not a liability.
• The correct definition of a liability is a financial obligation owed by a business to a creditor, which is a claim against the business's assets.

Answer:

A liability is a claim by a creditor against the assets of a business.