会计英语unit 9 Liabilities Owner’s equity.ppt

Unit 9 Liabilities Owner’s equity Ⅰ. Liabilities A liability is a present obligation requiring the future payment of an asset, the future performance of service, or the creation of another liability. In accordance with payment period, liabilities can be classified into current liabilities and non-current liabilities. 1.Current liabilities Definition Current liabilities are debts that are due and must be paid within one year or the operating cycle longer than a year. Such obligations will typically involve the use of current assets, or providing of some service. Purpose Its existence is to meet the demand of the business’ normal turnover. Content Accounts Payable, Notes Payable, Interest Payable, Tax Payable, etc (1)Account Payable Definition Accounts payable are short-term obligation owed to the suppliers for purchasing materials, merchandise or services. The time to record accounts payable is usually in accordance with invoices or bills received. Accounting Treatment It should be recorded at the amount payable. If cash discount is available, it should be reflected in the recording entries. Dr. Material 50,000 Cr. Accounts Payable 50,000 (2)Notes Payable Definition Notes Payable are formal short-term borrowings usually evidenced by a specific written promise to pay and mostly issued to meet short-term financing needs. Notes payable are often used instead of accounts payable because they give the lender written documentation of the obligation. Accounting Treatment Accounting Treatment Example Kroger purchased a batch of merchandise of $20,000 on May 1, and signed a 3-month, 6% note. (3) Tax Payable It refers to the amount of tax a person or company has to pay. When the time of the obligation occurred that requires business to pay tax is not consistent with that of actual payment, tax payable appears. 2.Long-term liabilities Definition Long-term liabilities are debts who se redemption period