Week 4 Lecture Notes- Liabilities

Week 4 Lecture Notes- Liabilities - journal entry when note...

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Unformatted text preview: journal entry when note is issued journal entry to record interest nal entry to settle liabilities ACCT1002 Week 4 Lecture Notes Liabilities Liabilities Future sacrifices of economic benefits that the entity is currently obliged to make as a result of a past transaction or other past events According to AASB 137- Debt incurred by organisation to sustain their operations- Must be settled at some point in the future by transfer of assets and services- Due date = maturity date (when liability has to be paid) CURRENT LIABILITIES Definition: an obligation that can reasonably be expected to be paid within one year or within the operating cycle, whichever one is longer. Liabilities that do not meet this criterion are classified as non-current. [An entity may lack liquidity or short-term debt-paying if there are more current liabilities] Accounts payable Revenue Accrued liabilities Notes payable Notes Payable Definition Written promissory notes to record obligations (legal documentation for claims) Required to pay interest or borrowing cost Frequently issued to financing short-term needs Can be issued for varying periods of time (1 yr for CA) Example Assume that East River Bank agrees to lend $100 000 on 1 March 2010 if Williams Ltd signs a $100 000, 12%, 4- month note. Mar-01 Cash 100,000 Notes Payable 100,000 (To record issue of 12%, 4-month note to East River Bank) Jun-30 Interest expense 4,000 Interest Payable 4,000 1 ACCT1002 Week 4 Lecture Notes Liabilities (To accrue interest for 4 months on East River Bank) Jul-01 Notes Payable 100,000 Interest Payable 4,000 Cash at bank 104,000 (To record payment of East River Bank interest-bearing note and accrued interest at maturity) Payroll and Payroll Deductions Payable Employer deducts amounts from employees' wages if they are required to be paid to other parties:- Pay-as-you-go Withheld Tax Payable- Salaries & wages payable- Health insurance- Donations to charity- Superannuation- Union fees Until these are remitted to the appropriate parties, recorded as increases (credits) to liability ac Entry for payroll accrual and payment: May- 07 Salaries and Wages Expense 100,000 Pay-as-you-go Withheld Tax Payable 32,036 Salaries and Wages Payable 67, 964 2 ACCT1002 Week 4 Lecture Notes Liabilities (to record payroll and withheld taxes for the week ending 7 March) May-07 Salaries and Wages Payable 67,964 Cash 67,964 (To record payment of 7 March payroll) Example: Cupcakes Ltd payroll for August 2009 was $150,000. Cupcakes pay week ended on 28 August 2009. The $150,000 payroll includes $10,000 for accrued wages since 28 August 2009. The $150,000 payroll includes $10,000 for accrued wages since 28 August. Payroll deductions from amounts being paid during August $10,000 for accrued wages since 28 August....
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This note was uploaded on 06/10/2011 for the course ACCT 1002 taught by Professor Angela during the Three '10 term at University of Sydney.

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Week 4 Lecture Notes- Liabilities - journal entry when note...

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