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Wefawef Essay

3267 words - 14 pages

Principles of Accounting
Chapter 10

Preview of Ch. #10


Current Liabilities
Current liability

A debt that the company expects to pay within one year or
the operating cycle, whichever is longer.

Most companies pay current liabilities by using current assets.

Current liabilities include notes payable, accounts payable, unearned revenues, and
accrued liabilities such as taxes, salaries and wages, and interest payable.


Current Liabilities
The time period for classifying a liability as current is one year or
the operating cycle, whichever is:
a. longer
b. shorter
c. probable
d. possible


Current Liabilities
Notes Payable

...view middle of the document...


Current Liabilities
Sales Tax Payable

Sales taxes are expressed as a stated percentage of the sales

Either rung up separately or included in total receipts.

Retailer collects tax from the customer.

Retailer remits the collections to the government’s department
of revenue.


Current Liabilities
Illustration: The March 25 cash register reading for Cooley Grocery
shows sales of NT$10,000 and sales taxes of NT$600 (sales tax rate of
6%), the journal entry is:


Current Liabilities
Unearned Revenue
Revenues that are received before the company delivers goods or
provides services.
1. Company debits Cash, and credits a
current liability account (Unearned
2. When the company earns the revenue,
it debits the Unearned Revenue account,
and credits a Revenue account.


Current Liabilities
Illustration: Busan IPark (KOR) sells 10,000 season football tickets at
₩ 50,000 each for its five-game home schedule. The club makes the
following entry for the sale of season tickets (in thousands of ₩):

Aug. 6

As each game is completed, Busan IPark records the revenue earned.

Sept. 7


Current Liabilities
Current Maturities of Long-Term Debt

Portion of long-term debt that comes due in the current year.

Considered a current liability.

No adjusting journal entry required.


Statement Presentation and Analysis

Current liabilities are presented after non-current liabilities on
the statement of financial position.

A common method of presenting current liabilities is to list them
by order of magnitude, with the largest ones first.


Statement Presentation and Analysis
Illustration 10-3


Statement Presentation and Analysis
Illustration 10-4

The current ratio permits
us to compare the liquidity
of different-sized compani
es and of a single company
at different times.

Liquidity refers to the ab
ility to pay maturing obli
gations and meet unexp
ected needs for cash.

Illustration 10-5


Non-Current Liabilities
Obligations that are expected to be paid after one year.

Bond Basics

A form of interest-bearing notes payable.

To obtain large amounts of long-term capital.

Three advantages over ordinary shares:
1. Shareholder control is not affected.
2. Tax savings result.
3. Earnings per share may be higher.

Bond Basics
Effects on earnings per share—equity vs. debt.
Illustration 10-7


Bond Basics
The major disadvantages resulting from the use of bonds are:
a. that interest is not tax deductible and the principal must be
b. that the principal is tax deductible and interest must be paid.
c. that neither interest nor principal is tax deductible.
d. that interest must be paid and principal repaid.


Bond Basics
Types of Bonds


Bond Basics
Issuing Procedures

Government laws grant...

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