Which term describes debts due within the next 12 months?

• A. Current Liabilities
• B. Non-Current Liabilities
• C. Owner's Equity
• D. Assets

Answer: (A)

Debts due within the next 12 months are described as current liabilities. In accounting, the balance sheet separates items into assets, liabilities, and owners’ equity. Current liabilities are short-term obligations that the business expects to settle within one year (or the operating cycle, if longer). They include things like accounts payable, short-term borrowings, and accrued expenses. This is why they’re the term that fits “debts due within the next 12 months.”

Non-current liabilities are longer-term obligations, due after 12 months. Owner's equity represents the owners’ claim on the business after debts, not obligations the business must pay. Assets are resources controlled by the business.