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POA Lecture 9

Chapter 10 focuses on current liabilities, defining them as debts expected to be paid within one year or the operating cycle. It covers major types of current liabilities, such as notes payable, accounts payable, unearned revenues, and accrued liabilities, along with their accounting treatment. The chapter also discusses the presentation of current liabilities on financial statements.

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POA Lecture 9

Chapter 10 focuses on current liabilities, defining them as debts expected to be paid within one year or the operating cycle. It covers major types of current liabilities, such as notes payable, accounts payable, unearned revenues, and accrued liabilities, along with their accounting treatment. The chapter also discusses the presentation of current liabilities on financial statements.

Uploaded by

nguyenthidieuhoa3007
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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10-1

Chapter 10 Liabilities

Learning Objectives
After studying this chapter, you should be able to:
1. Explain a current liability, and identify the major types of current
liabilities.
2. Describe the accounting for notes payable.
3. Explain the accounting for other current liabilities.
4. Identify the methods for the presentation of current liabilities.

10-2
Preview of Chapter 10

Financial Accounting
IFRS Second Edition
Weygandt Kimmel Kieso
10-3
Current Liabilities

Current liability
 A debt that the company expects to pay within one
year or the operating cycle, whichever is longer.
 Most companies pay current liabilities by using current
assets.

Current liabilities include notes payable, accounts payable, unearned


revenues, and accrued liabilities such as taxes, salaries and wages, and
interest payable.

LO 1 Explain a current liability, and identify the


10-4
major types of current liabilities.
Current Liabilities

Notes Payable
 Recorded obligation in the form of written notes.
 Usually require the borrower to pay interest.
 Issued for varying periods of time.
 Those due for payment within one year of the statement
of financial position date are usually classified as current
liabilities.

10-5 LO 2 Describe the accounting for notes payable.


Current Liabilities

Illustration: Hong Kong National Bank agrees to lend


HK$100,000 on September 1, 2014, if C.W. Co. signs a
HK$100,000, 12%, four-month note maturing on January 1.
Instructions
a) Prepare the journal entry on September 1.

10-6 LO 2 Describe the accounting for notes payable.


Current Liabilities

Illustration: Hong Kong National Bank agrees to lend


HK$100,000 on September 1, 2014, if C.W. Co. signs a
HK$100,000, 12%, four-month note maturing on January 1.
Instructions
b) Prepare the adjusting journal entry on December 31,
assuming monthly adjusting entries have not been made.

10-7 LO 2 Describe the accounting for notes payable.


Current Liabilities

Illustration: Hong Kong National Bank agrees to lend


HK$100,000 on September 1, 2014, if C.W. Co. signs a
HK$100,000, 12%, four-month note maturing on January 1.
Instructions
c) Prepare the journal entry at maturity (January 1, 2015).

10-8 LO 2 Describe the accounting for notes payable.


Current Liabilities

Illustration: Padillio Company had the following transactions


involving notes payable:
July 1, 2014 Borrows €60,000 from National Bank by signing
a 9-month, 8% note.
Dec 31, 2014 Prepares adjusting entries.
Apr 1, 2015 Pays principal and interest to National Bank.

Instructions: Prepare journal entries for each of the


transaction.

10-9 LO 2 Describe the accounting for notes payable.


Current Liabilities

Illustration: Padillio Company had the following transactions


involving notes payable:
July 1, 2014 Borrows €60,000 from National Bank by signing
a 9-month, 8% note.

10-10 LO 2 Describe the accounting for notes payable.


Current Liabilities

Illustration: Padillio Company had the following transactions


involving notes payable:
July 1, 2014 Borrows €60,000 from National Bank by signing
a 9-month, 8% note.
Dec 31, 2014 Prepares adjusting entries.

10-11 LO 2 Describe the accounting for notes payable.


Current Liabilities

Illustration: Padillio Company had the following transactions


involving notes payable:
July 1, 2014 Borrows €60,000 from National Bank by signing
a 9-month, 8% note.
Dec 31, 2014 Prepares adjusting entries.
Apr 1, 2015 Pays principal and interest to National Bank.

10-12 LO 2 Describe the accounting for notes payable.


Current Liabilities

Sales taxes payable


 Sales taxes are expressed as a percentage of the sales
price
 The selling company collects the tax from the customer
when the sale occurs.
 Periodically (usually monthly), the retailer remits the
collections to the government’s department of revenue.

10-13 LO 2 Describe the accounting for notes payable.


Current Liabilities

Illustration: If the March 25 cash register reading for Cooley


Grocery shows sales of NT$10,000 and sales taxes of NT$600
(sales tax rate of 6%), the journal entry is:
Mar. 25

10-14 LO 2 Describe the accounting for notes payable.


Current Liabilities

Illustration: If the March 25 cash register reading for Cooley


Grocery shows sales of NT$10,000 and sales taxes of NT$600
(sales tax rate of 6%).
When the company remits the taxes to the taxing agency:

10-15 LO 2 Describe the accounting for notes payable.


Current Liabilities

Unearned Revenue
Revenues that are received before the company delivers goods
or provides services.

1. Company debits Cash, and credits


a current liability account
(Unearned Revenue).
2. When the company earns the
revenue, it debits the
Unearned Revenue account,
and credits a Revenue account.

10-16 LO 3 Explain the accounting for other current liabilities.


Current Liabilities

Illustration: Busan IPark (KOR) sells 10,000 season football


tickets at W 50,000 each for its five-game home schedule. The
club makes the following entry for the sale of season tickets (in
thousands of W):

Aug. 6

As each game is completed, Busan IPark records the revenue


earned.

Sept. 7

10-17 LO 3 Explain the accounting for other current liabilities.


Current Liabilities

Current Maturities of Long-Term Debt


 Portion of long-term debt that comes due in the current year.
 Considered a current liability.
 No adjusting journal entry required.

10-18
Current Liabilities

Accrued liabilities
 Accrued liabilities: are liabilities that have been
incurred but not yet paid
Tax payable: accrued income tax
Tax expense
Tax payable

Salary payable: accrued salary


Salary expense
Salary payable

Interest payable: accrued interest


Interest expense
Interest payable
10-19
Statement Presentation and Analysis

Presentation
 Current liabilities are presented after non-current
liabilities on the statement of financial position.
 A common method of presenting current liabilities is to
list them by order of magnitude, with the largest ones
first.

10-20 LO 3 Explain the accounting for other current liabilities.


Statement Presentation and Analysis
Illustration 10-3

10-21 LO 3 Explain the accounting for other current liabilities.


Copyright

“Copyright © 2013 John Wiley & Sons, Inc. All rights reserved.
Reproduction or translation of this work beyond that permitted in
Section 117 of the 1976 United States Copyright Act without the
express written permission of the copyright owner is unlawful.
Request for further information should be addressed to the
Permissions Department, John Wiley & Sons, Inc. The purchaser may
make back-up copies for his/her own use only and not for distribution
or resale. The Publisher assumes no responsibility for errors,
omissions, or damages, caused by the use of these programs or from
the use of the information contained herein.”

10-22

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