Payables and Accrued Liabilities Flashcards
What effect would an unrecorded liability have on accrued liabilities and retained earnings?
Accrued liabilities are understated because the insurance costs were incurred but not paid. The firm has an obligation for coverage received. Retained earnings is unaffected because no expense has been incurred. The omission of the above entry has no effect on expenses or retained earnings.
Which of the following is generally associated with payables classified as accounts payable?
1) Periodic payment of interest
2) Secured by collateral
Neither. Accounts payable is also labeled: accounts payable, trade. The accounts payable account is used only for routine trade payables, typically for purchases of inventory and supplies.
Interest accrued is recorded in accrued interest payable, and secured debt is recorded in other specifically-labeled liability accounts.
Which of the following should be included in current liabilities for 2014?
- Accounts Payable
- Bonds Payable due 2015
- Disc. on Bonds Payable due 2015
- Deferred Income Tax Liability to reverse in 2016
All of them. If the Bonds Payable and Disc. on Bonds Payable were due in 2016 or later, they would not be included in current liabilities. If the Deferred Income Tax Liability was not to reverse until 2016 or later, it would not be included in current liabilities.
