Liabilities

Question 1

Payables

Answer 1

Liabilities to pay for G&S received or supplied
Short-term 30 - 60 days

Trade: payables arising from credit purchase of G&s
Other: arising from credit purchase of G&S from non-inventory suppliers

D in SOFPS:
Trade and other payables
Notes:
disaggregation btw types

Question 2

Accruals

Unearned Revenue

Answer 2

Liabilities to pay for G&S but not been paid
- determined on pro rata e.g. wages

Liabilities arising from cash received but performance obligation not carried out

Question 3

Commercial Bills

Answer 3

A written order to one party to make a specified payment to the signatory/ payee
% bearing
D in SOFPS:
Other financial liabilities

Question 4

Overdraft

Answer 4

Overdrafts – a negative bank balance, drawing on a line of credit (i.e. an overdraft limit)
D in SOFPS:
current liabilities as part of Borrowings

Question 5

Current Tax

Answer 5

Company Profits subject to Tax
Measurement:
Tax profit x 30%
D in SOFPS:
Prescribed line item in SoFPos: Current tax payable (or Current tax recoverable)
Current tax

Question 6

Deferred taxes

Answer 6

Diff btw AS measure $ and tax assessed in the Income tax act
* either A & L depending on +/-
Classified as non current
D in SOFPS:
Deferred tax liabilities or Deferred tax assets
Deferred taxes

Question 7

Borrowings/ Loans payable

Answer 7

Liabilities arising from borrowing money
* Long term % bearing

% loan:
NCL until the year of maturity

reducing balance loan:
part CL and NCL until the year of maturity

D in SOFPS:
Borrowings (disaggregated between current and non‐current)

Question 8

Lease Liabilities

Answer 8

Lease contract - obligations in terms of lease payments

Measurement:
NPV of minimum repayments under lease
Reduced by principal comp thru each term

D in SOFPS:
Lease liabilities (or Interest bearing liabilities) disaggregated between current and non‐current

Question 9

Other Financial Liabilities

Answer 9

Value is derived from a contractual obligation
E.g borrowings & lease liabilities
also bonds & debentures
D in SOFPS:
Other Financial Liabilities

Question 10

Provisions & Contingent Liabilities

Answer 10

Liabilities of uncertain timing & amount
Recognized:
PO / Portable transfer of eco resource
reliable estimate can be made to Obligation

D in SOFPS:
Provisions ( C & NC )

Question 11

Contributed Equity

Answer 11

Companies issuing shares to raise capital

D in SOFPS:
Issued Capital

Question 12

Ordinary Shares

Preference Shares

Answer 12

Ordinary Shares:
share of NA
share of $
vote

Preference Shares:
Div distributions
RO Capital
no voting no entitlement to assets

Question 13

Reserves ( Type 1 )

Answer 13

1. appropriated for a particular purpose, reducing need for further
   investment/borrowings

2.Reserves required by Accounting Standards arising from unrealised gains and losses

Retained Earnings - undistributed profits - not line item but disclosed in notes
D in SOFPS:
Reserves

Question 14

Reserves ( Type 1 )

Reserves ( Type 2 )

Answer 14

1. appropriated for a particular purpose, reducing need for further
   investment/borrowings

2.Reserves required by Accounting Standards arising from unrealised gains and losses

Retained Earnings - undistributed profits - not line item but disclosed in notes
D in SOFPS:
Reserves

Question 15

Divedends

Answer 15

Distribution of retained profits

D in S of changes in E

Question 16

Required Rate of Return

Answer 16

Shareholders’ risk > Lender’s risk

Question 17

Weighted Average Cost of Capital

Answer 17

WACC = (debt weight x Rl)+(equity weight x Re)

Commonly used as a rate to discount FC to NPV