Which item is NOT typically a current liability?

Which item is NOT typically a current liability?

• A. Current portion of long-term debt
• B. Current portion of capital lease obligation
• C. Accounts payable
• D. Goodwill

Answer: (D)

Current liabilities are obligations expected to be settled within one year or the operating cycle. The portion of long-term debt due in the next year is classified as a current liability because it will require an outflow within that period. The current portion of a capital lease obligation is treated the same way, since it’s the amount due within the short term. Accounts payable is also a current liability, representing amounts owed to suppliers that are typically paid within a short horizon. Goodwill, however, is an asset created in an acquisition and does not represent any obligation to be paid; it sits on the asset side of the balance sheet and is not a current liability. Therefore, goodwill is not a current liability.

Current liabilities are obligations expected to be settled within one year or the operating cycle. The portion of long-term debt due in the next year is classified as a current liability because it will require an outflow within that period. The current portion of a capital lease obligation is treated the same way, since it’s the amount due within the short term. Accounts payable is also a current liability, representing amounts owed to suppliers that are typically paid within a short horizon. Goodwill, however, is an asset created in an acquisition and does not represent any obligation to be paid; it sits on the asset side of the balance sheet and is not a current liability. Therefore, goodwill is not a current liability.