Which items are operating current liabilities (OCLs)?

Which items are operating current liabilities (OCLs)?

• A. Interest Payable; Taxes Payable; Deferred Revenue
• B. Cash; Marketable Securities; Short-Term Investments
• C. Tax; A/P; Deferred Revenue
• D. Accounts Receivable; Inventory; Prepaid Expenses

Answer: (C)

Operating current liabilities are short-term obligations that arise from normal business activities and are settled within a year (or the operating cycle). Taxes payable, accounts payable, and deferred revenue fit this because they come directly from day-to-day operations: taxes due on earnings, amounts owed to suppliers for purchases, and cash received in advance for goods or services not yet delivered. These are obligations tied to ongoing operations that will be settled in the near term. In contrast, items like cash, marketable securities, and short-term investments are assets, not liabilities. So they aren’t OCLs. Likewise, accounts receivable, inventory, and prepaid expenses are also assets, not liabilities. While interest payable can be tied to financing activities in some classifications, it’s not considered an operating current liability in the typical framework used here. So the set that represents operating current liabilities is taxes payable, accounts payable, and deferred revenue.

Operating current liabilities are short-term obligations that arise from normal business activities and are settled within a year (or the operating cycle). Taxes payable, accounts payable, and deferred revenue fit this because they come directly from day-to-day operations: taxes due on earnings, amounts owed to suppliers for purchases, and cash received in advance for goods or services not yet delivered. These are obligations tied to ongoing operations that will be settled in the near term.

In contrast, items like cash, marketable securities, and short-term investments are assets, not liabilities. So they aren’t OCLs. Likewise, accounts receivable, inventory, and prepaid expenses are also assets, not liabilities. While interest payable can be tied to financing activities in some classifications, it’s not considered an operating current liability in the typical framework used here. So the set that represents operating current liabilities is taxes payable, accounts payable, and deferred revenue.