Unit 9Liabilities&Owner'sequityassets = liabilitie s + owner'seguity
Unit 9 Liabilities & Owner’s equity assets = liabilitie s + owner'sequity
I.Liabilities A liabilityis apresent obligationreguiring thefuture payment of anasset,the future performance ofservice,or thecreation of anotherliability. Inaccordancewith paymentperiodliabilitiescanbeclassifiedintocurrentliabilitiesand non-currentliabilities
2 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.CurrentliabilitiesDefinition口Current liabilitiesaredebtsthat aredue and mustbepaid withinoneyearor theoperatingcyclelongerthanayear.Such obligations will typically involve the use ofcurrent assets,or providing of some service国PurposeItsexistenceisto meetthe demand ofthebusinessnormalturnover.口ContentAccountsPayable,NotesPayable,InterestPayable,TaxPayable,etc3
3 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)AccountPayableDefinitionAccountspayable are short-termobligation owed to the suppliers forpurchasingmaterials,merchandiseorservices.The timeto record accountspayableisusuallyin accordancewithinvoicesorbillsreceived/
4 (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
AccountingTreatment门It shouldberecordedat the amountpayable.If cashdiscountis availableit shouldbereflectedintherecording entries口ExampleAbusinesspurchasesabatchofmaterialsof $50,000withatermof2/10.n/30.5
5 Accounting Treatment It should be recorded at the amount payable. If cash discount is available, it should be reflected in the recording entries. Example A business purchases a batch of materials of $50,000 with a term of 2/10, n/30