COMM 211 Lecture Notes - Lecture 8: Contingent Liability, Finance Lease, Accounts Payable
2 Dec 2017
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Obligations that need to be settled through the transfer of assets or performance of services. Presented on the balance sheet as current and long-term assets. Notes payable and bank loans (if due within one year) Long term portions of notes payable, bank loans, debt, capital lease. Current liabilities of known amount: liabilities are carried at gross amount of the obligation ex. Current liabilities that must be estimates: an allowance is estimated and provided based on past experience ex. Warranty expense is recognized in the same period of sales revenue based on estimate of historically defective products. A liability that is contingent on the outcome of a future event ex. A lawsuit in progress the outcome is unknown at the reporting date and is based on a future court ruling. Unless the probability of an obligation is remote, the contingent liability should be disclosed in the notes of the financial statements.
