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Unformatted text preview: entries, thus it is done before preparing the financial statements at the end of the accounting period. (2-7A) Steve Chang received $500 in advance for tutoring fees when he agreed to help Jon Seng with his introductory accounting course. Upon receiving the cash, Steve mentioned that he would have to record the transaction as a liability on his books. Seng asked, “Why a liability? You don’t owe me any money, do you? Respond to Seng’s question regarding Chang’s liability. Liability does not mean I owe you money necessarily; it is viewed “as future obligations of the enterprise. To settle the obligations, the business will probably either relinquish some of its assets, provide services to its creditors, or accept other obligations” (McNair 12). In your case Seng, I am providing a service to you because I was paid in advanced so it is a liability....
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This document was uploaded on 10/19/2011.
- Spring '09