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Lecture 3

BADM*1060 Lecture Notes - Lecture 3: Canada Pension Plan, Unemployment Benefits, Current Liability

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Howard Leaman

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Week 3 - Accounting II: Reporting and Analyzing Liabilities Part 1
Current 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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