Which of the following is not a current liability?
Click on the arrows to vote for the correct answer
A. B. C. D.C
Allowance for Uncollectible Accounts is a contra account to Accounts Receivable, both of which are reported in the current asset section of the balance sheet.
Let's go through each option and determine whether it is a current liability or not:
A. Notes Payable: Notes Payable refers to the amount of money a company owes to a lender or creditor, typically in the form of a promissory note. It represents a debt that is expected to be repaid within one year or the operating cycle, whichever is longer. Since it is expected to be settled in the near future, Notes Payable is considered a current liability. Therefore, option A is not the correct answer.
B. Wages Payable: Wages Payable represents the amount of wages that a company owes to its employees but has not yet paid. It arises when employees have provided services but have not received their compensation by the end of the reporting period. Wages Payable is a current liability since it is expected to be settled within a short period, usually within a year. Therefore, option B is not the correct answer.
C. Allowance for Uncollectible Accounts: The Allowance for Uncollectible Accounts, also known as the Allowance for Doubtful Accounts or Bad Debt Reserve, is a contra-asset account that reduces the accounts receivable to reflect the estimated amount that is unlikely to be collected from customers. It is not a liability but a valuation account that represents the estimated uncollectible accounts receivable. Therefore, option C is the correct answer as it is not a current liability.
D. Unearned Revenue: Unearned Revenue, also called deferred revenue or advance payments, arises when a company receives payment for goods or services before delivering them. It represents an obligation to provide goods or services in the future. Unearned Revenue is considered a liability until the company fulfills its obligation by delivering the goods or services. Since it is an obligation expected to be settled in the future, Unearned Revenue is a current liability. Therefore, option D is not the correct answer.
In conclusion, the correct answer is option C. The Allowance for Uncollectible Accounts is not a current liability.