G. PAYABLES AND ACCRUED LIABILITIES

Question 1

_{G. PAYABLES AND ACCRUED LIABILITIES}

Liability General Info

Answer 1

• Liabilities are classified as either ‘current’ or ‘non-current’.
• Current liabilities are expected to be paid within one year or one operating cycle.
• Current liabilities are not interest-bearing.
• Current liabilities are primarily accounts payable and accrued liabilities/expenses.

Question 2

_{G. PAYABLES AND ACCRUED LIABILITIES}

Accounts Payable

Answer 2

Accounts Payable

These are short-term liabilities due to purchasing goods or services on credit.

Journal entry example:

Office supplies 50

Inventory 50

Accounts payable 100

Question 3

_{G. PAYABLES AND ACCRUED LIABILITIES}

Accrued Expenses

Answer 3

Accrued Expenses

These are expenses that are recognized in the books before they are paid for.

The main example being:

• payroll,
• interest, and
• taxes.
• Payroll liabilities are the wages that are accrued as employee’s work, and then are paid out as wage or salary expense on payday.
• Payroll liabilities also include the employer portion of taxes and fringe benefits such as FICA and Medicare.

Journal entry example:

Wages expense 500

Wages payable 500

When the wages are paid:

Wages payable 500

Cash 500