Liability” is defined as the present obligation of a company arising from past events and fulfillment of which causes outflow of economic benefits in terms of payments of cash, transfer of assets or rendering of services. From another perspective, with a very basic level definition, liability represents the part of financing that a company provides from resources other than claims of its equity owners. Depending on their maturities, liabilities are classified as “current liabilities” and “non-current liabilities”. The term “current” means “in the same period”, which stands for either “the same 12-months period” or “the same operating cycle”, whichever is longer. If it takes more than 12-months after the purchase of raw materials to produce and sell products and collect the receivables in return, this means that the operating cycle is more than 12 months for that company. In other words, the time needed by the company to provide funds from its operations and fulfill its liabilities is more than 12 months; thus, the term “current” proxies for the operating cycle. All expenses should be recorded in the periods they incur; so that the performance of the company can be assessed accurately, as its income statement covers all revenues and expenses for that period. Recognition of expenses do not require a cash outflow. Therefore, expenses are recognized in income statement even if they are not paid yet. When an expense incurs but the payment will be made in other periods, companies should also record a liability to be settled in future periods. That liability is called “accrued expenses”. Completely opposite situation, in which the company collects cash in advance but the goods or service will be delivered in other periods, also required the company to recognize a liability. However, this time the name of liability is “unearned revenue”. In short, the term “accrual” refers to expenses that are incurred but unpaid, while “unearned revenue” refers to future revenues that are collected but not delivered yet.The correct answer is D.