ACG_Ch_10 - Reporting Analyzing Liabilities Current Liabilities \u25cf A debt that a company expects to pay either \u25cb From existing current assets or

ACG_Ch_10 - Reporting Analyzing Liabilities Current...

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Reporting & Analyzing Liabilities Current Liabilities A debt that a company expects to pay either From existing current assets or through creation of other current liabilities Within one year or the operating cycle, whichever is longer A company with more current liabilities than current assets Lacks liquidity Types of current liabilities Notes payable Accounts payable Unearned revenues Accrued liabilities Taxes Salaries and wages Interest Notes Payable Companies record obligations in the form of written notes Frequently issue notes payable to meet short-term financing needs Entry for issuance of note Debit Cash for face value Credit Notes Payable for face value Interest accrues over the life of the note Issuer must periodically record that accrual Entry for Interest accrued Debit Interest Expense Credit Interest Payable Entry at maturity Debit Notes Payable (face value) Debit Interest Payable Credit Cash (face value + interest accrued) Sales Tax Payable Selling company periodically remits the collection of taxes to the state’s department of revenue Journal Entry for sales of $10k and sales taxes of $600 Debit Cash $10,600 Credit Sales Revenue $10,000 Credit Sales Tax Payable $600 When company remits the taxes to taxing agency
Debits Sales Tax Payable Credits Cash Company does not report sales taxes as an expense Unearned Revenues When the company receives an advance Debits Cash Credits current liability account When the company recognizes revenue (performs service) Debits Unearned Revenue Credits Revenue Bonds: Long-Term Liabilities Bonds

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