CURRENT LIABILITIES Chapter 13
CHARACTERISTICS OF LIABILITIES •What three characteristics are required for a liability? • What is the difference between a current liability and long-term liability? •Bronson Distributors owes a supplier $100,000 on an open account. The amount is payable in 3 months. What is the theoretically correct way to measure the reportable amount for this liability? In practice, how will it likely be reported? Why?
EXAMPLES OF CURRENT LIABIL ITIES • What are examples of current liabilities? • What is the difference between accounts payable and accrued liabilities? • What is the difference between accounts payable and notes payable?
8/15/22 - BUY INVENTORY ON ACCOUNT - $50,000DebitCredi t 8/30/22 - ACCRUED PAYROLL FOR AUGUST AT $30,000. JOURNAL ENTRIES DebitCredi tDebitCreditDebitCredi t 9/10/22 - PAY INVENTORY BILL THAT WAS ACCRUED IN AUGUST 9/5/22 - PAYDAY
FINANCIAL STATEMENT ANALYSIS •Would a company want more current liabilities or more long-term liabilities? •What ratios are important that utilize current liabilities?
PAYROLL BENEFITS • How do you know when to accrue for payroll benefits like vacation or sick days? • How do you know when to accrue for annual bonuses?
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