Chapter 11 Study Guide

Chapter 11 Study Guide - CHAPTER 11 Current Liabilities and...

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Unformatted text preview: CHAPTER 11 Current Liabilities and Payroll Accounting STUDY OBJECTIVES 1. EXPLAIN A CURRENT LIABILITY, AND IDENTIFY THE MAJOR TYPES OF CURRENT LIABILITIES. 2. DESCRIBE THE ACCOUNTING FOR NOTES PAYABLE. 3. EXPLAIN THE ACCOUNTING FOR OTHER CURRENT LIABILITIES. 4. EXPLAIN THE FINANCIAL STATEMENT PRESENTATION AND ANALYSIS OF CURRENT LIABILITIES. 5. DESCRIBE THE ACCOUNTING AND DISCLOSURE REQUIREMENTS FOR CONTINGENT LIABILITIES. 6. COMPUTE AND RECORD THE PAYROLL FOR A PAY PERIOD. 7. DESCRIBE AND RECORD EMPLOYER PAYROLL TAXES. 8. DISCUSS THE OBJECTIVES OF INTERNAL CONTROL FOR PAYROLL. *9. IDENTIFY ADDITIONAL FRINGE BENEFITS ASSOCIATED WITH EMPLOYEE COMPENSATION. CHAPTER REVIEW Current Liabilities 1. (S.O. 1) A current liability is a debt that can reasonably be expected to be paid (1) from existing current assets or in the creation of other current liabilities, and (2) within one year or the operating cycle whichever is longer. Current liabilities include notes payable, accounts payable, unearned revenues, and accrued liabilities. Notes Payable 2. (S.O. 2) Notes payable are obligations in the form of written promissory notes that usually require the borrower to pay interest. Notes due for payment within one year of the balance sheet date are usually classified as current liabilities. 3. When an interest-bearing note is issued, the assets received generally equal the face value of the note: a. During the term of the note, it is necessary to accrue interest expense. b. At maturity, Notes Payable is debited for the face value of the note and Interest Payable is debited for accrued interest. Sales Taxes Payable 4. (S.O. 3) A sales tax is expressed as a stated percentage of the sales price on goods sold to customers by a retailer. The entry by the retailer to record sales taxes is as follows: Cash.................................................................................................. XXXX Sales.......................................................................................... XXXX Sales Taxes Payable................................................................. XXXX When sales taxes are not rung up separately on the cash register, total receipts are divided by 100% plus the sales tax percentage to determine the sales. Unearned Revenues 5. Unearned Revenues (advances from customers) are recorded by a debit to Cash and a credit to a current liability account identifying the source of the unearned revenue. When the revenue is earned, the unearned revenue account is debited and an earned revenue account is credited....
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This note was uploaded on 10/10/2011 for the course ACCOUNTING 510 taught by Professor Havens during the Spring '11 term at Davenport.

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Chapter 11 Study Guide - CHAPTER 11 Current Liabilities and...

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