Explanation

Salaries in arrears means money owed to employees for work already done. The business has a debt to pay soon. Debts due within one year are current liabilities.

Assets are things the business owns, not owes. Salaries owed are definitely a liability. Long-term liabilities take over a year to pay, but salaries must be paid quickly.

Key point: “In arrears” means behind on payments. This creates a short-term debt to employees.