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Final

ACC2100 Study Guide - Final Guide: Current Liability
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2 Pages
87 Views
Fall 2017

Department
Accounting
Course Code
ACC2100
Professor
Dr Dharmendra Naidu
Study Guide
Final

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Definition Criteria for Liabilities
Future&outflow&of&economic&benefits
Settlement'of'the'present'obligation
E.g.,'bank'contract'specifies'future'outflow
Giving'up'resources'to'settle'the'obligation
1.
Legally'enforceable'obligations'(consequences)
Contractual'arrangements'(e.g.,'a'bank'loan)
Imposed'on'the'entity'(e.g.,'income'tax'payable)'
Good'business'practice'or'equitable'obligations'(e.g.,'repair'faults'outside'
warranty'period)
Constructive'obligation'based'on'a'pattern'of'events
Does'not'include'future'commitments'(e.g.,'decision'to'purchase'asset'in'the'
future)
2.
Occurrence'of'past'event'
Transaction*creating*the*present*obligation*must*have*occurred
A*present* obligation*cannot*be*created*by*a*future*transaction*
3.
Recognition Criteria for Liabilities
Probable future outflow of economic benefits
More likely than not
Greater than 50% chance of occurring
E.g., a pending decision in a law suit
1.
Reliable measurement
Transaction to verify the cost
Reasonable estimate
2.
Current liabilities
Less than one year period
Non current liabilities
More'than'12'months'
LIABILITIES(
Tuesday,' 23'May'2017
9:07'pm

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Description
LIABILITIES Tuesday, 23 May 2017 9:07 pm Definition Criteriafor Liabilities 1. Future outflow of economic benefits Settlement of the present obligation E.g., bank contract specifies future outflow Giving up resources to settle the obligation 2. Present obligation Legally enforceable obligations (consequences) Contractual arrangements (e.g., a bank loan) Imposed on the entity (e.g., income tax payable) Good business practice or equitable obligations (e.g., repair faults outside warranty period) Constructive obligation based on a pattern of events Does not include future commitments (e.g., decision to purchase asset in the future) 3. Occurrence of past event Transaction creating the present obligation must have occurred A present obligation cannot be created by a future transaction RecognitionCriteriafor Liabilities 1. Probable futureoutflow of economic benefits More likely than not Greater than 50 chanceof occurring E.g., a pending decision in a law suit 2. Reliable measurement Transaction to verify the cost
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