MGAB02H3 Chapter Notes - Chapter 9: Unemployment Benefits, Contingent Liability, Canada Pension Plan
10 May 2018
School
Department
Course
Professor
Chapter 9
Reporting and Interpreting Current Liabilities
Pages 492-546
Excercises 523-546
Liabilities: Are present debts or obligations arising from an entity’s past transactions that will be paid with assets or services
Current Liabilities: Short-term obligations that will be settled within the coming year by providing cash, goods, other current
assets or services
Liquidity: The ability to pay current obligations
Operating Activity Current Liability
Purchase home appliances ——-> Accounts Payable
Service performed by employees ——-> Accrued Liabilities
Cash received from customers for future delivery of merchandise ——-> Deferred revenue
Provide warranty on products sold ——-> Provisions
Accused Liabilities : Expenses that have been paid at the end of the accounting period
Various types of taxes (not on income) •
HST ◦
GST ◦
PST ◦
JOURNAL ENTRY
Cash (A)
Sales Revenue (R)
GST Payable (L)
PST Payable (L)
Payroll Liabilities
Employees earn unpaid salaries •
Part of accured liabilities •
Employee Deductions
Require employer to deduct tax •
“Usually” the largest amount withheld •
Various Reasons •
EI - Employment Insurance ◦
CPP - Canadian Pension Plan ◦
QPP - Quebec Pension Plan ◦
POTENTIAL JOURNAL ENTRY
Compensation Expense (E)
Liaibility for income taxes withheld (L)
CPP Payable (L)
EI Payable (L)
Cash (A)
Time Value of Money: Interest that is associated with the use of money over time
Interest Equation:
Document Summary
Liabilities: are present debts or obligations arising from an entity"s past transactions that will be paid with assets or services. Current liabilities: short-term obligations that will be settled within the coming year by providing cash, goods, other current assets or services. Cash received from customers for future delivery of merchandise -> deferred revenue. Accused liabilities : expenses that have been paid at the end of the accounting period. Time value of money: interest that is associated with the use of money over time. Deferred revenues: previously recorded liabilities that need to be adjusted period to reflect the amount of revenues earned. Provision: a liability of uncertain timing or amount. Contingent liability: a possible liability that is created as a result of a past event; it is not an effective liability until some future event occurs. Working capital: the difference between current assets and current liabilities.
