Question

Describe the difference between current and long-term assets and liabilities. Why do you think it is important for assets and liabilities to be distinguished in terms of current and long-term?

Answer 1

The current liability is the liability which has a period of not more than one financial year ,before that period it will be settled with current assets of that year.

Examples are short term loans, accounts payable etc

The long term liability is liability in which this may not be settled in a year, it can be go more than 1 year or more

Examples , mortgage loans, leases etc

For the preparation of a classified balancesheet the classification of current and long term is required to identify the liabilities. The benefit of this is the shake holders and executives of the company will know the cash liability of a year through the current liability because of the settlement within a year.

So that's why it is so important to differentiate current and long term liability in accounting.