Liabilities Week 1 Flashcards
Define Accounts Payable
represents what the company owes to vendors or suppliers
What are some current liabilities
Income Taxes Payable, Short term loans, compensation and benefits, deferred revenues
Define Income taxes payable
Monies owed to government for work performed by employees
Define Short term loan
Monies borrowed with the intention of repaying within a year
Define Compensation and benefits
salaries and benefits owed to employees for work they have completed
Define Deferred Revenues
goods and services paid for but not completed
Define non current liabilities
Liabilities that have more than a year life span
What are some non current liabilities
Notes payables, Deferred Income taxes, Bonds Payable, Long term loans
Define Notes payable
Agreements with vendors or suppliers that you will make payments for a set time longer than a year
Deferred Income Taxes
Represents the difference between amount of the depreciation expenses on a financial statement is vs the amount reported on a company’s income tax statement
Define Bonds Payable
issued by a company which promises to pay back on principal at a set time
examples of non current
2 Year loan, Mortgage, Car loan
Liabilities have a normal ____side
credit side
What is the definition of a liability
the claims against a company’s assets
a company obligation that will come due within a year is ?
current liability
a company’s obligation that will come due more than a year
non current liability
the expected balance of a particular account is known as ?
the normal balance
What financial statement is deferred revenue on and why
Balance sheet because it hasn’t been earned so could potentially be given back so it is a liability
You should be careful to spend moneys from this account ?why?
Deferred revenue, because you could potentially have to give that money back
Why is deferred revenue good
because it’s some times better to get financing from customers rather than a bank loan
An account with a balance other than what is expected or normal may indicate a(n) __________
error
Dale wants to take out a mortgage to purchase a commercial space to expand his business: “Tailor Swift - Quick Alterations and Embroidery Services”. He has found a property, prepared his business proposal, and is going to meet with the bank. He has been working out of his home for years and already has a good client base, lots of equipment, and inventory valued at $50,000 to get his business off the ground in a formal space.
If granted a $100,000 mortgage, how would the accounting equation look to keep his books balanced?
Liabilities 100k +, Assets 100k+, Equity 0
Suzanne owns a clothing store in a small beach town called ‘Sunny Side Threads’. She wants to expand her brand’s influence by using a van she can hang clothes and accessories in for traveling to events along the coast during summer.
If Suzanne were to purchase a $45,000 van with a bank loan, paying $12,000 down, at 6.99% over 72 months, where would the loan itself go on the balance sheet?
Long term loan - Liabilities
Tosin has a customer who has already paid him to come pressure wash their house next month. Tosin would record this payment as a _______?
Current Liabilities
When setting up an account to document a line of credit in QuickBooks, you need to:
Set up two separate accounts, one for the principal and an expense account for interest
Seymore Fish takes out vendor credit of $5500 with “Akon Aquatics Custom Tank Supplies” to replace his custom-made fish tanks for “Seymore’s Sea Store” where he sells pet fish and small sea creatures.
Seymore would credit his line of credit under _______ for $5,500 and debit his _____ for $_______?
Accounts payable and Fixed Asset- Fish Tank; $5,500
In the same state, shoes, bananas, and a haircut would all be subject to the same sales tax rate. Ture of False
False, because different municipalities may have different tax codes
Funds in the Sales Tax Payable account can be treated as if they were Sales Revenue. True or False
False, because sales tax payable is a liability
Which feature of accounting software can provide information about how much sales tax is owed to each tax agency?
Sales tax liability report
