ACC 131 Lecture Notes - Lecture 8: Reserve Requirement, Current Liability, Financial Statement
Document Summary
Liabilities - profitable future sacrifices: future outflow assoc. w/ liability is not always pmt of cash, may not be known with certainty, may not be legally enforceable, may not be payable to known recipient. Characteristics of liabilities: payment of assets, certainty, amount and timing not always known, legal enforceability, some may only represent probable claims, payment recipient, does not exclude payments to unidentified recipients. Total payment = principal + (principal x interest rate x period) Current and long-term liabilities: expected to retire w/existing current assets/creation of new current liabilities and, due within one year or one operating cycle, whichever is longer. Contingent liabilities - depend on a future event: ex: outcome of a lawsuit. Recognition depends on: likeliness of occurrence and, whether an accurate estimate of payment can be made. Accounts payable- liability when business purchases on credit. Seldom require payment of interest; generally due within 30-60 days.
