BUSA 101

Chapter 10 – Current Liabilities

Schmidt

 

Goals of Chapter:

• Be familiar with a variety of common current liabilities:

                        Accounts Payable

                        Notes Payable

                        Unearned accounts

                         Contingent Liabilities

                         Vacation liabilities

                        Product Warranty liabilities

• Be able to prepare JE’s for common Note Payable transactions
• Be able to prepare basic Payroll JE’s (covered in BUSA 100)

                        JE to record the payroll

                        JE to record the employer’s payroll taxes

• Be familiar with the proper presentation of liabilities on the Balance Sheet

 

 

 

What are they?

 

 

 

 

How do they arise?

 

 

 

Types of Current Liabilities:

 

Short Term Notes Payable: (Exercise 10-4, 10-5, Prob. 10-1A)

 

 

 

 

 

 

 

 

                      Know JE for Conversion

 

 

 

 

 

 

 

                    Payment

 

 

 

 

 

 

 

 

Discounted Short Term Notes Payable (Ex. 10-2)

 

 

 

 

 

 

 

Contingent Liabilities:  Past transactions that may result in potential liabilities.  READ  and understand what liabilities need to be recorded and which items need to be disclosed.  What are the GAAP requirements for a liability to be recorded and/or disclosed.  See the diagram on page 401 of your text. 

 

 

 

 

 

            Accrued Warranties: (Ex. 10-7)

 

 

 

 

 

 

Payroll and Payroll Taxes

Can be a significant expense with multiple tax issues which lead to numerous liabilities related to the payroll.

 

 

JE to record the payroll: (Ex. 10-11, Problem 10-2A)

 

 

 

 

 

 

 

 

 

JE to record the employer’s payroll taxes: (Also Prob. 10-2A)

 

 

 

 

 

 

 

Be familiar with other payroll related journal entries –

 

Fringe Benefits – Additional benefits provided to employees in addition to salaries and wages.  Fringe benefits can be a substantial cost. Average cost to employers is 37% of gross pay:

 

                    Vacation (Ex. 10-18)

 

 

 

 

 

 

 

 

                   Pensions (Ex. 10-19)

 

 

 

 

 

                   Other Post-retirement Benefits