Final Exam Review Ch. 9 Flashcards
(31 cards)
Define Liability.
A probable future payment of assets or services that a company is currently obligated to make as a result of past transactions or events.
How are Liabilities classified?
- Current
- Long-term
What are current liabilities? (2)
Liabilities due within a year
Liabilities without a fixed date
What are long-term liabilities?
Liabilities due after a year.
What are the 3 uncertainties of liabilities?
- Who to pay
- When to pay
- How much to pay
When are the answers to uncertainties of liabilities usually answered?
When the liability is incurred.
When does a company have uncertainty of whom to pay?
When the company has a specific amount payable to a note’s holder at a specific date, but does not know who the holder is until that date.
How are uncertainties of whom to pay reported?
They are recorded on the Balance Sheet
When does a company have uncertainty of when to pay?
When the company is obligated to pay a specific amount, but does not know hen it must be paid.
How are uncertainties of when to pay reported?
They are recorded on the Balance Sheet
When does a company have uncertainty of how much to pay?
When a cost is incurred and created before a liability is received.
How are uncertainties of how much to pay reported?
Reported as an estimate if the Balance Sheet is prepared before the liability arrives.
Define short-term Notes Payable.
A written promise to pay a specified amount on a future date within one year.
Can be sold or transferred
Most bear interest
What are the transactions that create short-term Notes Payable?
- Note given to extend credit period
- Note given to borrow from a bank
What are payroll liabilities?
the result of salaries and wages, employee benefits, and payroll taxes levied on employers.
Define gross pay.
The total compensation an employee earns
What are the to classes of payroll deductions/withholdings?
- Required deductions; Bound by law
- Voluntary deductions
How are payroll deductions and withholdings recorded?
As a current liability until sent.
What are the required payroll deductions on Employees?
- FICA Social Security taxes
- FICA Medicare taxes
- Employee Income taxes
How is Employee Payroll recorded?
Employers accrue payroll expenses and liabilities at the end of each pay period.
What are the required payroll deductions on Employers?
- FICA Social Security taxes
- FICA Medicare taxes
- FUTA taxes
- SUTA taxes
How are Employer payroll taxes recorded?
As a Payroll Tax Expense on the Balance Sheet
What are the 4 key areas we aim to separate in monitor as an internal control of payroll?
- Employee Hiring
- Payroll preparation
- Timekeeping
- Payroll payment
Define an estimated liability.
A known obligation of an uncertain amount that can be reasonably estimated.
