ADM 1340 Study Guide - Current Liability, Contingent Liability

• School: University of Ottawa
• Department: Administration
• Course: ADM 1340
• Professor: All

Document Summary

Adm 1340- financial accounting: chapter 10- reporting and analyzing liabilities. Current liability: a debt that will be paid within one year and from existing current assets or through the creation of other current liabilities. Non-current (long-term liabilities): debts that do not meet both of the requirements to be considered a current liability. Operating line of credit: the company has been pre-authorized by the bank to borrow money, up to a pre-set limit, when it is needed. Floating (variable) interest rate: an interest rate that changes as market rates change and is usually based on the prime borrowing rate. Bank indebtedness: this occurs in the event that the amounts drawn on an operating line of credit result in a negative, or overdrawn, cash balance at year end. *review sales tax, property tax, payroll, and short-term notes payable examples on pages. 1- liquidity: an operating line of credit increases liquidity. 2- solvency: debt to total assets ratio-see page 550 of the textbook.