Accounts payable these amounts represent the claims

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Accounts payable: These amounts represent the claims of suppliers related to goods supplied or services rendered by them to the business enterprise for which they have not yet been paid. Usually these claims are unsecured and are not evidenced by any formal written acceptance or promise to pay. When the enterprise gives a written promise to pay money to a creditor for the purchase of goods or services used in the business or the money borrowed then the written promise is called as bills payable or notes payable. Amounts due to financial institutions which are suppliers of funds, rather than of goods or services are termed as short- term loans or some other name that describes the nature of the debt Instrument, rather than accounts payable. Outstanding expenses: These are expenses or obligations incurred in the previous accounting period but the payment for which will be made in the next accounting period. A typical example is wages or rent for the last month of the accounting period remaining unpaid. It is usually paid in the first month of the next accounting period an4 hence It is an outstanding expense. Income received in advance: These amounts relate to the next accounting period but received in the previous accounting period. This item of liability is frequently found in the balance sheet of enterprises dealing in the publication of newspapers and magazines. Provision for Taxes: This is the amount owed by the business enterprise to the Government for taxes. It is shown separately from other current liabilities both because of the size and because the amount owed may not be known exactly as on the date of balance sheet. The only thing known is the existence of liability and not the amount. Long term Liabilities: All liabilities which do not become due for payment in one year and which do not require current assets for their payment are classified as long-term liabilities or fixed liabilities. Long term liabilities may be classified as secured loans or unsecured loans. When the long-term loans are obtained against the security of fixed assets owned by the enterprise they are called as secured or mortgage loans. When any asset is not attached to these loans they are called as unsecured loans. Usually long-term liabilities include debentures and bonds, borrowings from financial institutions and banks, public debts, etc. Interest accrued on a particular secured long term loan, should be shown under the appropriate sub-heading. Contingent Liabilities: Contingent liabilities are those liabilities which may or may not result in liability. They become liabilities only on the happening of a certain event. Until then both the amount and the liability are uncertain. If the event happens there is a liability; otherwise there is no liability at all. A very good example for contingent liability is a legal suit pending against the business
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46 enterprise for compensation. If the case is decided against the enterprise the liability arises and in the case of favourable decision, there is no liability at all.
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