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Chapter 8 - Chapter 8 Liabilities and Stockholders Equity...

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Chapter 8: Liabilities and Stockholders’ Equity
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Financing Operations Businesses must finance operations through one of two ways: Debt Financing – includes all liabilities owed by a business. Equity Financing – investments from owners of the business. Stock is issued to represent ownership interest.
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Liabilities Debts owed to others. Current liabilities – due within a short time, usually 1 year. Long-term liabilities – due beyond 1 year. Some liabilities are contingent on the outcome of future events.
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Current Liabilities Usually arise from two basic transactions: Receiving goods or services prior to making payment (e.g., Accounts Payable). Receiving payment prior to delivering goods or services (e.g., Unearned Rent).
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Notes Payable Longer and more formal than accounts payable. Usually bear interest. Issued to creditors when merchandise or other assets are purchased.
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Assume that a business issues a 90-day, 12% note for $1,000, dated August 1, 2008.
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Income Taxes Include federal income taxes and possibly state and local income taxes. Most corporations are required to pay federal income taxes in four installments throughout the year.
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Taxable Income vs. Income Before Taxes
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Chapter 8 - Chapter 8 Liabilities and Stockholders Equity...

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