F5M1 Flashcards
liabilities
probable future sacrifices
liabilities are either classified as
current or non current
identify and describe the two types of ways to account for liabilities
gross and net
gross without regard to discount
net considers the discount
int he net method of recording liabilities, describe the treatment
net considers the discount
if the discount is not taken, then a purchase discount loss is debited
Basic JE for accrued expenses
Dr. Expense
Cr. Liability
Current obligations
Liabilities that are due within 1 year
When can you account for refinancing liability
- when the refinancing happens
OR
- there is a non cancelable financing agreement
JE for refinancing debt
DR: short term liability
CR: long term liability
Two methods of accruing for property taxes
accrued prior to receipt or upon the recipt of invoice
Sales Tax JE
Cash
CR: revenue
CR: sales tax payable
If they only give the cash amount, you divide by 1+ interest rate
Treatment of employer’s share of payroll tax
accrued as an expense
DR: payroll tax expense
Treatment of employee’s share of payroll tax
DR: SWB expense
CR: FICA
CR: withholding
CR: cash
Treatment of bonus
recorded to SWB expense
Treatment of accrued vacation
recorded in year earned if
- already rendered to employee
- relates to rights that vest
- resonably estimated and probable
do not recognize liability for sick days
JE accrued vacation treatment
the amount is recorded concurrent with their salary
you will incur additional expense if their salary has risen since they accrued vacation
