ADMS 2500 Chapter Notes -Matching Principle, Investment Banking, Interest Expense

• School: York University
• Department: Administrative Studies
• Course: ADMS 2500
• Professor: Brian Gaber

Document Summary

Funds used to acquire assets come from two sources: Suppliers, employees and customers that provide cash in advance before the delivery of a good are all providing funds for the firm. ~ non-owners (1) obligation involves probable future sacrifice of resources transfer of cash, goods/services or (2) entity has little or no discretion to avoid transfer (3) transaction or event giving rise to the entity"s obligation has already occurred. Obligation recognized as a liability of entity and has three characteristic: the foregoing of future cash receipts (at specific time). Cash equivalent of resources that are to be sacrificed must be measureable with reasonable precision. Long term liabilities valued as present value of payments to be made in future, using interest rate. Short term liabilities usually appear with face value on balance sheet because difference between amount payable and present value is immaterial. Depends on the length of time that will elapse before payment must be made.