Chapter 10 Flashcards

1
Q

When is a current liability due?

A

A current liability is due within 12 months of the balance sheet date.

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2
Q

What is a provision in terms of accounting?

A

A provision in terms of accounting is a liability that involves uncertainty around the amount and the timing.

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3
Q

What is a contingency in terms of accounting?

A

A contingency is a potential liability that depends on the outcome of a future event.

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4
Q

What are some example of known (determinable) liabilities?

A

Accounts payable, unearned revenue, wages payable, notes payable (short term), Amount owed (current portion.) of long term debt, bank overdraft (a negative balance.)

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5
Q

What do we do with provisions in terms of accounting?

A

Provisions must be estimated so they accurately reflect the company’s financial position. So, provisions are estimated and accrued.

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6
Q

What are some common examples of provisions in terms of accounting. What do all of these things have in common?

A

Warranties, customer loyalty programs and gift certificates. All of these things must be estimated as you don’t know for certain how many of these will be turned in and when.

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