Chapter 13

Card Set Information

Author:
Anonymous
ID:
61510
Filename:
Chapter 13
Updated:
2011-01-23 19:17:32
Tags:
Current Liabilities Contingencies
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Description:
Current Liabilities and Contingencies
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  1. What is a liability?
    Probable future Sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events
  2. What is a current liability?
    obligations whose liquidation is expected to require current assets
  3. Typical current liabilities
    • Accounts payable
    • Notes payable
    • current maturities of long-term debt
    • short-term obligations expected to be refinanced
    • dividends payable
    • customer advances and deposits
    • unearned revenues
    • sales tax payable
    • income taxes payable
    • employee-related liabilities
  4. Accounts payable
    definition
    2 ways of recording
    Balances owed to others for goods, supplies or services

    Can be recorded using gross or net method
  5. Gross method
    • ??? XXX
    • Accts Payable XXX

    • when paid:
    • Accts payable XXX
    • Cash XXX
    • Sales discounts XXX
  6. Net method
    • Inventory XXX
    • A/P XXX
    • (recorded less the sales discount)

    • if paid past the discount date:
    • A/P XXX
    • Cash XXX
    • Sales Discounts forfeited XXX
  7. Interest-bearing note
    The amount of the note and the amount of cash received are the same

    Interest accrues over time
  8. Zero-interest bearing note
    The amount of the note and cash are different. The difference is recorded as a discount or premium on notes payable and is amortized over the life of the note and charged to interest expense.

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