lecture9_student - Reporting and Interpreting Liabilities...

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Reporting and Interpreting Liabilities Chapter 9
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Liabilities Defined and Classified Defined as probable debts or obligations of the entity that result from past transactions, which will be paid with assets or services. Maturity = 1 year or less Maturity > 1 year Current Liabilities Noncurrent Liabilities
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Liabilities Defined and Classified Liabilities are measured at their current cash equivalent (the amount a creditor would accept to cancel the debt) at the time incurred.
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Current Liabilities Account Name Also Called Definition Accounts Payable Trade Accounts Payable Obligations to pay for goods and services used in the basic operating activities of the business. Accrued Liabilities Accrued Expenses Obligations related to expenses that have been incurred, but will not be paid until the subsequent period. Notes Payable N/A Obligations due supported by a formal written contract. Deferred Revenues Unearned Obligations arising when cash is received prior to the related revenue being earned.
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Accounts Payable (A/P or Trade Payable) Accounts payable - obligations to pay suppliers in the normal course of business for the purchase of goods and services. Credit terms provide for the due date of payments. These terms may include cash discount provisions for early payment. (2/10,n/60) Interest does not normally accrue on A/P if paid within the credit period
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Notes Payable A note payable specifies the interest rate associated with the borrowing. To the lender, interest is a revenue . To the borrower, interest is an expense . Interest = Principal × Interest Rate × Time When computing interest for one year, “Time” equals 1. When the computation period is less than one year, then “Time” is a fraction.
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Notes Payable Toyota borrows $100,000 for 2 months at an annual interest rate of 12%. Compute the interest on the note for the loan period. Interest = Principal × Interest Rate × Time Interest =
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Accrued Liabilities Expenses incurred but have not been paid by the end of the accounting period. It is typically an adjusting entries ( matching principle ) at the end of the period since no cash transaction has taken place. E.g. Accrued Taxes Payable Tax Expense (exp ↑, SE↓) XXXX Taxes Payable (L ↑) XXXX
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Unearned revenue/deferred revenue cash is received earlier than the delivery of product or the provision of services; Revenue can be recognized only when the goods are delivered or the service be performed.
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Net Pay Medicare Tax State and Local Income Taxes Social Security Federal Income Tax Voluntary Deductions Gross Pay Payroll Less Deductions:
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Accrued Compensation and Related Costs Vacation leave
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Exercise 9-3 Colonial Company has completed the payroll for January 2010, reflecting the following data: Salary and wage earned $86,000 Employee income taxes withheld 10,000 FICA payroll taxes* 6,000 *Assessed on both employer and employee (i.e., $6,000 each)
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This note was uploaded on 05/10/2011 for the course ACCT 1002 taught by Professor Ng during the Spring '11 term at National University of Singapore.

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lecture9_student - Reporting and Interpreting Liabilities...

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