ACC2100 Study Guide - Final Guide: Current LiabilityPremium

2 pages95 viewsFall 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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