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BADM*1060 (7)
Lecture 3

BADM*1060Lecture 3: Chapter 3

2 Pages
44 Views
Summer 2016

Department
Business
Course Code
BADM*1060
Professor
Howard Leaman
Lecture
3

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Week 3 - Accounting II: Reporting and Analyzing Liabilities Part 1
Current Liabilities
Liabilities:
- Obligations resulting from past transactions
- Classified as current and long term
Current Liabilities:
- They are expected to be paid form existing current assets or through the creation of
other current liabilities within one year.
- Debts that do not meet these criteria are known as long term liabilities.
Types of Current Liabilities:
- Accounts payable and Accrued liabilities
- Operating line of credit
- Notes payable
- Sales taxes
- Property taxes
- Payroll
- Current maturities of long-term debt
Accounts Payable:
- Amounts owing to creditors
- Normally due in 30 days
- Interest charged on overdue accounts only
Operating Line of Credit:
- Prearranged agreement between a company and a lender to allow the company to
borrow up to an agreed-upon amount
- May result in bank indebtedness
Notes Payable:
- Often used instead of accounts payable
- Provide written documentation, if needed, for legal remedies
- Normally has interest attached
- Used for short-term and long-term financing needs
Sales Tax Payable:
- Federal Goods and Service Tax (GST)
- Provincial Sales Tax (PST or QST)
- Harmonized into one combined sales tax (HST) in some provinces
o May or may not be included in sale price
o Must be remitted periodically to respective governments
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Description
Week 3 - Accounting II: Reporting and Analyzing Liabilities Part 1 Current Liabilities Liabilities: - Obligations resulting from past transactions - Classified as current and long term Current Liabilities: - They are expected to be paid form existing current assets or through the creation of other current liabilities within one year. - Debts that do not meet these criteria are known as long term liabilities. Types of Current Liabilities: - Accounts payable and Accrued liabilities - Operating line of credit - Notes payable - Sales taxes - Property taxes - Payroll - Current maturities of long-term debt Accounts Payable: - Amounts owing to creditors - Normally due in 30 days - Interest charged on overdue accounts only Operating Line of Credit: - Prearranged agreement between a company and a lender to allow the company to borrow up to an agreed-upon amount - May result in bank indebtedness Notes Payable: - Often used instead of accounts payable - Provide written documentation, if needed, for legal remedies - Normally has interest attached - Used for short-term and long-term financing needs Sales Tax Payable: - Federal Goods and Service Tax (GST) - Provincial Sales Tax (PST or QST) - Harmonized into one combined sales tax (HST) in some provinces o May or may not be included in sale price o Must be remitted periodically to respective governments Week 3 - Accounting II: Reporting and Analyzing Liabilities Part 1 Property Taxes Payable: - Businesses that own property pay poverty taxes for each calendar year to municipal or provincial governments - Property taxes are calculated at a specified rate for every $100 of the assessed valued of the property Property Taxes Payable: - Upon receipt of the property tax bill (Assume March), expense is recorded for the months that have passed (assume January and February) - When paid (Assume May), expense is recorded for additional months that have passed, and prepaid is set up for remaining months - Prepaid is cleared to expense at the end of the year Payroll and Employee Benefits Payable: - Employee Payroll Deductions o Canada Pension Plan (CPP) o Employment Insurance (EI) o Federal and Provincial Income Taxes o Other Deductions at Sources - Employer Payroll Contributions o CPP
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