10 - Reporting and Analyzing Liabilities Flashcards
Liabilities are sometimes known as ________’ ______ on total assets.
Liabilities are sometimes known as creditors’ claims on total assets.
A ________ liability is a liability that will be paid or settled within one year from the date on the statement of financial position or within one operating cycle.
A current liability is a liability that will be paid or settled within one year from the date on the statement of financial position or within one operating cycle.
A floating (or variable) interest rate changes as _______ _____ _____ change and is usually based on the prime borrowing rate.
A floating (or variable) interest rate changes as market interest rates change and is usually based on the prime borrowing rate.
Security, called _________, is often required by banks as protection against a possible default on the loan by the borrower.
Security, called collateral, is often required by banks as protection against a possible default on the loan by the borrower.
Collateral for an operating line of credit normally includes some of the company’s _______ ______ but may also include some ____ ____.
Collateral for an operating line of credit normally includes some of the company’s current assets (such as accounts receivable or inventory) but may also include some non-current assets (such as investments or property, plant, and equipment).
Sales tax is expressed as a percentage of the sales _____.
Sales tax is expressed as a percentage of the sales price.
Property taxes are generally for a _______ _____, although bills are not usually issued until the _____ of each year.
Property taxes are generally for a calendar year, although bills are not usually issued until the spring of each year. (March)
As employees perform services for their employer, the employer incurs three types of liabilities related to the employees’ salaries or wages:
(1) the amount _____ to employees,
(2) employee payroll ______, and
(3) employer payroll _______.
As employees perform services for their employer, the employer incurs three types of liabilities related to the employees’ salaries or wages:
(1) the amount owed to employees,
(2) employee payroll deductions, and
(3) employer payroll obligations.
Management and administrative personnel are generally paid _______, which are expressed as a specific amount per week (weekly), per two weeks (biweekly), per month (monthly), or per year (annually).
Management and administrative personnel are generally paid salaries, which are expressed as a specific amount per week (weekly), per two weeks (biweekly), per month (monthly), or per year (annually).
Part-time employees or employees paid on an hourly basis or by the work produced (an amount per unit of product) are normally paid _______.
Part-time employees or employees paid on an hourly basis or by the work produced (an amount per unit of product) are normally paid wages.
The total amount of salaries or wages earned by the employee is called _____ pay.
The total amount of salaries or wages earned by the employee is called gross pay.
Payroll deductions are also commonly referred to as _______ deductions because they are being withheld from the employee at the “______” of the payment.
Payroll deductions are also commonly referred to as source deductions because they are being withheld from the employee at the “source” of the payment.
Ex. CPP, EI, vacation pay
Accounts payable and notes payable that result from transactions with ______ are often called trade payables.
Accounts payable and notes payable that result from transactions with suppliers are often called trade payables.
A fixed interest rate is a _______ rate for the entire _____ of the note.
A fixed interest rate is a constant rate for the entire term of the note.
Notes payable are also commonly referred to as _____ payable, and interest expense is also referred to as ______ costs.
Notes payable are also commonly referred to as loans payable, and interest expense is also referred to as finance costs.
An account payable is supported by an _______ and gives an ______ promise to pay, while a note payable is a written _______ to pay that gives the payee a stronger _____ _____.
An account payable is supported by an invoice and gives an informal promise to pay, while a note payable is a written promise to pay that gives the payee a stronger legal claim.
Record sales separately from _____ _____. Recall that sales tax is a liability until _______.
Record sales separately from sales tax. Recall that sales tax is a liability until remitted.
interest = ____ × _____ × ____
interest = principal (face) value × annual interest rate × time
Liabilities can either be ______ (definitely determinable) or ______.
Liabilities can either be certain (definitely determinable) or uncertain.
Liabilities with a known payee, due date, and amount payable are _____ liabilities.
Liabilities with a known payee, due date, and amount payable are certain liabilities.
Ex. Accounts payable, sales tax payable, property tax payable, salaries payable, notes payable
Provisions are _____ of _______ timing or amount; however, there is no uncertainty about the fact that a liability should be recorded, only that its value and settlement date are uncertain. They are recorded because
(1) their outcome is probable and
(2) the amount owed can be estimated.
Provisions are liabilities of uncertain timing or amount; however, there is no uncertainty about the fact that a liability should be recorded, only that its value and settlement date are uncertain. They are recorded because
(1) their outcome is probable and
(2) the amount owed can be estimated.
Under IFRS, probable is defined as “more likely than not,” which is normally interpreted to mean more than a ___% probability of occurring.
Under IFRS, probable is defined as “more likely than not,” which is normally interpreted to mean more than a 50% probability of occurring.
Provisions are _______ but contingent liabilities ______. Contingent liabilities are disclosed in the ____ to the financial statements except when the possibility of an outflow of resources is _____.
Provisions are recorded but contingent liabilities are not. Contingent liabilities are disclosed in the notes to the financial statements except when the possibility of an outflow of resources is remote.
Provisions are recorded when they are ______ and can be ______.
Provisions are recorded when they are probable (more likely than not) and can be estimated.
Contingent liabilities are not _________. If the liability is probable or cannot be determined or the amount cannot be estimated, it should be disclosed. If it is unlikely (remote), it is not disclosed.
Contingent liabilities are not recorded. If the liability is probable or cannot be determined or the amount cannot be estimated, it should be disclosed. If it is unlikely (remote), it is not disclosed.
A non-current liability is an obligation that is ________ to be paid after _____ year or more.
A non-current liability is an obligation that is expected to be paid after one year or more.
Ex. instalment notes payable, bonds payable, finance leases, deferred income taxes, and pension liabilities.
Long-term notes and loans may be ______ or _______. A secured note pledges _______ (ownership) to specific assets as collateral or security for the loan.
Long-term notes and loans may be secured or unsecured. A secured note pledges title (ownership) to specific assets as collateral or security for the loan.
Ex. A note or loan that has property as collateral is known as a mortgage.
_________ notes and loans offer no collateral to the lender and are issued against the general ______ of the borrower.
Unsecured notes and loans offer no collateral to the lender and are issued against the general credit of the borrower.
Repayments on notes/loans are referred to _________ and are paid monthly, annually, or at other defined intervals of time.
Repayments on notes/loans are referred to instalments and are paid monthly, annually, or at other defined intervals of time.
Each instalment payment consists of a mix of (1) _______ on the unpaid balance of the loan, and (2) a _______ of a portion of the loan principal.
Each instalment payment consists of a mix of (1) interest on the unpaid balance of the loan, and (2) a repayment of a portion of the loan principal.
The actual instalment payments generally take one of two forms: (1) _____ principal payments plus _____, or (2) ______ principal and _______ payments.
The actual instalment payments generally take one of two forms: (1) fixed principal payments plus interest, or (2) blended principal and interest payments.
