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Chapter 9

COMMERCE 1AA3 Chapter Notes - Chapter 9: Harmonized Sales Tax, Contingent Liability, Promissory Note


Department
Commerce
Course Code
COMMERCE 1AA3
Professor
Emad Mohammad
Chapter
9

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Chapter 9: Liabilities
Curret Liailities: oligatios due ithi the loger of oe ear or the opa’s oral
operating cycle
Two kinds of current liabilities:
1. Known Amounts
a. Short Term Borrowings: needed to cover temporary shortfalls in cash.
b. Accounts Payable: amounts owed for goods or services purchased on credit
c. Accrued Liabilities (accrued expenses): results from an expense incurred but not
yet paid (salaries and wages payable, interest payable, income tax payable)
d. Short-term notes payable: notes due within one year
i. When the note is issued, it can be for cash or to purchase assets
1. Cash XXX
Note Payable XXX
An adjusting entry must be recorded to accrue interest incurred
Interest Expense XXX
Interest Payable XXX
Following entry is required when the note is paid
Note Payable XXX
Interest Expense XXX
Interest Payable XXX
Cash XXX
Sales Tax Payable: reflects taxes levied on the sale of goods and services which
sellers collect from customer and must periodically remit to the government
Goods and services tax (GST)- a value added tac that applies to most
goods and services
Provincial or regional sales tax (PST)- retail tax applied to goods and
services purchased with rates varying by province or region
Harmonized sales tax (HST)- combines PST and GST and is a value added
ta… treated the sae as GST
o Entry to record PST and GST
Accounts Receivable XXX
COGS XXX
Sales Revenue XXX
Inventory XXX
GST Payable XXX
PST Payable XXX
o Entry to record HST
Accounts Receivable or Cash XXX
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