Unearned revenues obligations created when the

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Unearned revenues-obligations created when the company accepts payment in advance for goods or services it will deliver in the future; also called advances from customers, customer deposits, or deferred revenues. Short-term notes payable-short-term debt payable to banks or other creditors. Current maturities of long-term debt-principal portion of long-term debt that is due to be paid within one year. Apple reports current liabilities of $20,722 million on its 2010 balance sheet. Accounts payable arise when one company purchases goods or services from another com- pany. Typically, sellers offer credit terms when selling to other companies, rather than expecting cash on delivery. The seller records an account receivable and the buyer records an account pay- able. Apple reports accounts payable of $12,015 million as of the balance sheet date. Accounts payable are relatively uncomplicated liabilities. A transaction occurs (inventory purchase), a bill is sent, and the amount owed is reported on the balance sheet as a liability. Apple's accrued liabilities total $8,707 million. Accrued liabilities refer to incomplete transactions. For example, employees work and earn wages, but usually are not paid until later, such as several days after the period-end. Wages must be reported as expense in the period that employees earn them because those wages payable are obligations of the company and a liability (wages payable) must be set up on the balance sheet. This is an accrual. Other common accruals include the recording of liabilities such as rent and utilities payable, taxes payable, and interest payable on borrowings. All of these accruals involve recognition of expense in the income statement and a liability on the balance sheet. Net working capital, or simply working capital, reflects the difference between current assets and current liabilities and is defined as follows:
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Module 2 I Overview of Business Activities and Financial Statements 2-8 Net working capital = Current assets - Current liabilities usually prefer to see more current assets than current liabilities to ensure that companies _ liquid. That is, companies should have sufficient funds to pay their short-term debts as they . The net working capital required to conduct business depends on the company's operat- _ or cash) cycle, which is the time between paying cash for goods or employee services and iving cash from customers-see Exhibit 2.3. Companies, for example, use cash to purchase or manufacture inventories held for resale. tories are usually purchased on credit from suppliers (accounts payable). This financing is ed trade credit. Inventories are sold, either for cash or on credit (accounts receivable). When ivables are ultimately collected, a portion of the cash received is used to repay accounts pay- and the remainder goes to the cash account for the next operating cycle.
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