ACC 110 Chapter Notes - Chapter 9: Current Liability, Accounts Payable

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Published on 1 Dec 2011
Department
Course
Chapter 9 – Liabilities
Liabilities: obligations – to provide cash, goods, or services to customers,
suppliers, employees, government, lenders and anyone else an entity (owes
something to”)
- Results from past transactions or event
- Settlement requires a sacrifice of resources and not negotiable
Current liabilities: obligations that will be satisfied in one year or one operating
cycle.
Long-Term liabilities: obligations that will be satisfied over one year or longer
than one operating cycle
Types of current liabilities:
Bank and other demand loans
- Demand loans must be repaid whenever the lender request repayment
- Considered current because lender’s right to call the load at any time even
though they rarely demand repayment and the loans remain on the book for
a long time.
Accounts Payable
- Amount an entity owes to suppliers for goods and service.
- Goods and services include anything the entity uses in the course of its
operation, Including inventory, supplies, labour and etc.
Collection on behalf of third parties
- Most entities act as tax collectors for various government taxation
authorities.
- Example GST and HST when purchasing merchandise
Income taxes Payable
- Tax on income to both the federal and provincial government
Dividend Payable
- Obligation to pay the corporation’s shareholders a dividend that has been
declared.
Accrued liabilities and provisions
Unearned Revenue
- Entity receives cash in advance of providing goods or service, it has an
obligation to provide those goods or service since cash is on hand
- Example: deposit for furniture, advance rent payments, ticket purchases and
gift cards
Disclosure
- Segregate current liabilities by main categories
- Accounts payable & accrued liabilities are usually shown together
- Segregation between current / non-current not required (but may be
desirable)
- Detailed disclosure on provisions
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