Chapter 6: Liabilities

Question 1

term bonds

Answer 1

expire in their entirety at one point in the future

Question 2

serial bonds

Answer 2

paid back in installments over a period of time

Question 3

secured bonds/mortgage bonds

Answer 3

provide the bondholder with the right to certain assets if the company fails to fulfil the obligations

Question 4

unsecured bonds/debentures

Answer 4

these bonds rely solely on good faith but carry a higher interest than secured bonds as there is more risk

Question 5

accounts payable

Answer 5

amounts due for goods and services purchased on account

Question 6

accrued liabilities

Answer 6

results from an expense in the business has incurred but not yet paid

Question 7

unearned revenue

Answer 7

received cash before the product or service has been delivered

Question 8

payroll related liabilities

Answer 8

compensation for employees

Question 9

note payable

Answer 9

amount due for products and services a company has signed an obligation to pay. interest is being paid over those accounts

Question 10

sales tax payable

Answer 10

tax needed to be paid to tax authorities

Question 11

tax payable

Answer 11

income tax which is not yet paid

Question 12

defined contribution

Answer 12

where the employers make a fixed payment to the employee’s pension fund. The obligation ends when the contribution is completed

Question 13

defined benefit

Answer 13

the employer still has obligations even when the employee resigns

Question 14

provision

Answer 14

you can see it possibly coming but you are not sure if it will and how much it will amount and therefore, you keep an amount of money behind –> provision!