Chapter 9 – Liabilities
Liabilities: obligations – to provide cash, goods, or services to customers,
suppliers, employees, government, lenders and anyone else an entity (owes
- 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
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.
- Amount an entity owes to suppliers for goods and service.
- Goods and services include anything the entity uses in the course of its