Chapter 8 Flashcards
Liabilities
- debt
- debts or obligations that result from past transactions which will be paid with assets or services
- measured at their current cash equivalent
Current liabilities
-maturity of 1 year or less
expected to be paid with a current asset (usually cash) or a service
working capital
CA- CL
current ratio
CA/CL
Examples of Current Liabilities
- Accounts payable
- accrued liabilities
- unearned revenue
- current maturities of L-T Debt
Accrued Liabilities
expenses that have been incurred before the end of the accounting period but have not been paid
- wages payable
- interest payable
unearned revenue
cash is collected before the revenue has been earned (gift cards, season tickets)
Current maturities of L-T Debts
portion of LT debt that will be due within next year should be classified as current liability
Estimated Liabilities
an obligation that involves an existing condition for which the outcome is not known with certainty and depends on some event that will occur in the future.
Estimated Liabilities if probable
- $ amount can be estimated and recorded as a liability
or - $ amount cannot be estimated and will be disclosed in footnotes
Estimated Liabilities if possible
whether we can or cannot estimate the $ amount we will disclose in footnotes
Estimated Liabilities if remote
no disclosure
adjusted journal entry for estimated liability
expense xx
Estimated Liability xx
interest bearing notes
principle+interest due at maturity
journal entry: to record issuance of note
Cash xx
note payable xx
Journal entry to record payment at maturity:
Note Payable xx
Interest exp. xx
Cash. xx
non interest bearing notes
interest is deducted in advance
journal entry:
Cash xx
discount xx
note payable xx
Balance sheet:
Note payable xx
- discount (xx)
= carrying value xx. (the amount owed today)
