Question

1. How most companies pay current liabilties ?

2.

Answer 1

Answer- Most companies paid current liabilities out of current assets.

Notes payable is not the general mode of payment towards current liabilities like accounts payable and expenses payable. Only in rare occasions the notes payable is used to pay the current liability. Thus, it is not mostly used by the companies.

Stock represents owner’s equity and is issued to the outsiders for cash. It is not issued to pay current liabilities.

Long-term liabilities are made by the company to raise cash for use in the long-term activities of the company. They are not created to pay the current liabilities.

The current liabilities are the liabilities created in the regular course of business activities and include accounts payable and expenses payable. These current liabilities are generally repaid in the form of cash and most of the companies follow the same.