Current Liabilities and Short-Term Financing

Apuntes

Chapter 10 - Liabilities How to Account for Current Liabilities ● Current Liability: a debt that a company expects to pay within ○ one year or ○ the operating cycle, whichever is longer ● Current liabilities include ○ Notes Payable ○ Accounts Payable ○ Unearned Revenues ○ Accrued Liabilities ■ Taxes Payable ■ Salaries and Wages Payable ■ Interest Payable ● Basically, all things you’ll have to pay for in the upcoming year are current liabilities Current Liabilities | Notes Payable ● Written promissory note ● Frequently issues to meet short-term financing needs ● Requires the borrower to pay interest ● Issued for varying periods ● Notes payable are different than accounts payable because: ○ 1) Notes are formalized in writing with a set due date and interest rate ○ 2) Accounts payable is typically just a vendor offering a customer 30 days to pay an invoice as a courtesy Notes Payable Example Current Liabilities | Sales Taxes Payable ● Sales taxes = Stated percentage of the sales price ● In NJ (and many other states), most products and services are subject to sales tax ○ If vendors sell a taxable item, they must collect sales tax on behalf of the state (NOT OPTIONAL) ● Selling company ...