COMMERCE 1AA3 Lecture Notes - Lecture 21: Debenture, Contingent Liability, Accounts Payable
21 Nov 2016
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Liability is current, if it is paid through current asset, or by creating another liability (e. g convert accounts payable to notes payable, a long term) Estimated liabilities can appear on the balance sheet, if it fulfills qualifications. Sales tax is considered liability, until it is forwarded to government. Accrue, also in notes ( shown as a liability e. g contingent liability, lawsuit liability) Fixed principal and interest ( not used very often ) The interest for each year that is paid is the current carrying value. The entry at the payment each year would be. The current portion of the long term debt will only be shown on the balance sheet, and is not shown in journal entries. Blended interest and principal (the most common type of note ) Interest = interest rate * current carrying value. The new carrying value can be calculated by : previous carrying value amount - principal amount.
