BUS 251 Lecture Notes - Lecture 9: Revolving Credit, Current Liability, Gift Card

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Liability: the company expects to meet an obligation through an outflow of resources that represent future economic benefit. The obligation results from an event that already happened: significance of current liabilities: b. i. Normally recorded at fair value: current liabilities with lenders c. i. Bank indebtedness or line of credit (know this) c. i. 1. Revolving credit facility, meaning you only dip into it when you need it and then pay it off asap. c. i. 2. Used to deal with short term cash shortages or timing differences. c. ii. Short term / working capital loans (not as common, not important to focus on) c. ii. 1. c. ii. 2. Short term loan maybe secured by inventory or a/r or both. Longer term loans require blended payments of principal plus interest. c. iii. 2. Journal entry (paying current portion of loan) c. iii. 3. a. Occur when a company buys a good on credit c. iv. 1. b. Typically required to be paid within 30-60 days, can be provisions (discounts) for early payments c. iv. 1. c.

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