Week 9 (accounting for liabilities)

Question 1

Liability recogntion

Answer 1

recognised- meets definition and recognition criteria

disclosed- meets definition does not meet recognition criteria

Question 2

Provisions

Answer 2

A provision is a liability of uncertain timing or amount

examples:
- leave entitlements
- warrentees

Question 3

Contigient liability

Answer 3

A possible obligation that arises from past events, not wholly in the control of the entity.

examples:
- company being sued

Question 4

GST

Answer 4

Paying GST:

example buying inventory for $4000
Dr- Inventory $4000
Cr- Cash $4000

Dr- GST paid $400
Cr- Account payable $400

Getting GST:

Selling inventory $7500

Dr- Cash $8250
Cr- GST collected (liability) $750
Cr- Sales (income) $7500

Question 5

Loan instalments

Answer 5

Borrowed $6500. The interest rate was 12% pre annum, she made a payment of $300

Dr- interest (expense) $65
Dr- Loan (liability) $235
Cr- Cash (asset) $300

Question 6

Payg

Answer 6

PayG is also a liability same as GST

Question 7

When tax is paid to the ATO

Answer 7

Dr- liability of that tax
Cr- Cash

Question 8

Accounting for annual leave

Answer 8

As someone will gain thier annual leave but may not take it
Dr- Annual leave (expense)
Cr- Provisions for annual leave (liability)

when someone takes their annual leave:
Dr- provisions for annual leave
Cr- Cash

Question 9

Accounting for warrenty

Answer 9

Dr- warrentee (expense)
Cr- Provisions for warrentee (liability)