Introduction to Accounting18 October 2016Session 17
Agenda•Attendance•Quiz results•Module 1: Liabilities (Not in the study materials)•Module 2: Account Payable (Not in the study materials)•25 October Quiz: Liabilities & Account Payable
Objectives•Understand the definition of liabilities•Understand how to record account payable and accrued expense in the book•Understand invoice credit terms
The Accounting EquationChapter 1When a business is set up by its owner and is funded by vendors and lenders, the equation looks like:EquityLiabilitiesAssets
Liabilities•Amounts owned to vendors and lenders. •Amounts owned by a business which has a legal binding obligation to another business, or entity. •Liabilities are incurred in order to fund the ongoing activities of a business.•Liabilities often have the word "payable" in the account title. Examples of liabilities are accounts payable, or wages payable. •Liabilities also include amounts received in advance for a future sale or for a future service to be performed. Examples of unearned revenues.
Liabilities•Current liabilities: Liabilities expected to be settled within one year are classified as current liabilities on the balance sheet. Examples of account payable, wages payable, current term portion of loan payable and etc. •Non-current, or long-term liabilities: All other liabilities are classified as long-term liabilities. Example of customer deposits, long term portion of loan payable.
Liabilities•When a company orders and receives goods (or services) in advance of paying for them, we say that the company is purchasing the goodson accountor