Upload
muhammad-unaib-aslam
View
195
Download
0
Embed Size (px)
Citation preview
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
LiabilitiesLiabilitiesotaleem.blogspot.comotaleem.blogspot.comfor more presentation(follow me)for more presentation(follow me)
Chapter 10
10-2
The Nature of LiabilitiesThe Nature of LiabilitiesDefined as debts or obligations arising from
past transactions or events.
Maturity = 1 year or less Maturity > 1 year
Current Liabilities
Noncurrent Liabilities
10-3
Estimated LiabilitiesEstimated LiabilitiesEstimated liabilities have two basic
characteristics:1.The liability is known to exist, 2.The precise dollar amount cannot be determined until a later date.
Example: An automobilewarranty obligation.
10-4
Short-term obligations to suppliers for purchases of merchandise and to others for
goods and services.
Merchandise inventory invoices
Shipping charges
Utility and phone bills
Office supplies invoices
Current Liabilities: Accounts Current Liabilities: Accounts PayablePayable
ExamplesExamples
10-5
Total Notes Payable
Current Notes Payable
Noncurrent Notes Payable
When a company borrows money, a note payable is created.
Current Portion of Notes PayableThe portion of a note payable that is due within one year,
or one operating cycle, whichever is longer.
Current Liabilities: Notes Current Liabilities: Notes PayablePayable
10-6
Accrued LiabilitiesAccrued LiabilitiesAccrued liabilities arise from the recognition of
expenses for which payment will be made in the future. Accrued liabilities are often referred to as
accrued expenses.
Examples include:1.Interest payable,2.Income taxes payable, and3.Accrued payroll liabilities.
10-7
Net Pay
Payroll LiabilitiesPayroll Liabilities
Medicare Taxes
State and Local Income TaxesFICA Taxes Federal
Income TaxVoluntary
Deductions
Gross Pay
10-8a liability account.
Cash is received
in advance.
Cash is sometimes collected from the customer before the revenue is actually earned.
Unearned RevenueUnearned Revenue
As the earnings process is completed
10-9
Relatively small debt needs can be filled from single sources.
Banks Insurance Companies Pension Plansoror oror
Long-Term LiabilitiesLong-Term Liabilities
10-10
Large debt needs are often filled by issuing bonds.
Long-Term LiabilitiesLong-Term Liabilities
10-11
With each payment, the interest portion gets smaller
and the principal portion gets larger.
Installment Notes PayableInstallment Notes Payable
Each payment covers interest for the period AND a portion of the
principal.
Long-term notes that call for a series of installment payments.
10-12
Bonds PayableBonds PayableBonds usually involve the
borrowing of a large sum of money, called principalprincipal.
The principal is usually paid back as a lump sum lump sum at the end of the bond period.
Individual bonds are often denominated with a par value, or face valueface value, of $1,000.
10-13
Bonds PayableBonds PayableBonds usually carry a stated rate of interest,
also called a contract ratecontract rate.Interest is normally paid semiannually.Interest is computed as:
Principal × Stated Rate × Time = InterestPrincipal × Stated Rate × Time = Interest
10-14
Mortgage Bonds
Convertible Bonds
Junk Bonds
Debenture Bonds
Types of BondsTypes of Bonds
10-15
End of Chapter 10End of Chapter 10